Answer:
I need it because I need to have Control on Costs and Revenue generating activities, divisions, people, processes, projects etc. to have a firm grip on profitability which is Revenue - Cost = Profit. It also helps to take accurate Business decisions.
Profit Centre Accounting is under Enterprise Controlling (IMG) - Profit Centre Accounting - Master Data / Assignment to Profit Centres. You have Cost Centres and Profit Centres in every organisation. You as a CEO of a Company would like to identify Organisational Units that is responsible for its balance of Costs and Revenues. A Cost Centre would merely add to the Costs and would not generate Revenue. For example Accounts Division in an Organisation is a Cost Centre while Sales Division is a Profit Centre (It has costs as well as generates revenue).
The advantage of Profit Centre Accounting is the ability of the Management to identify the Centres within the Organisation that are Profitable and the ones that are not.
A profit center is a management-oriented organizational unit used for internal controlling purposes. Dividing your company up into profit centers allows you to analyze areas of responsibility and to delegate responsibility to decentralized units, thus treating them as "companies within the company".
You can Group Profit Centres based on the Company criteria.
You can Assign Business Transactions that either reflect Costs or Revenue to Profit Centre. Mapping such activities/transactions is 90% of configuration in Profit Centre Accounting. You can assign Sales Order to Profit Centre.
Costs can be Cost of the Material, Revenue can be from Sales Order (Business Transaction).
To assign material masters, choose Master data -> Current settings from the application menu, then choose Assignment: Materials/Master.
To perform a fast assignment, choose Master data -> Current settings from the application menu, then choose Assignment: Materials/Fast Assignment. Alternatively, you can choose Master Data -> Assignment Monitor -> Materials -> Fast Assignment.
You can find a detailed description of how to assign materials in the Implementation Guide (IMG) for Profit Center Accounting, under Assignments to Profit Centers.
Sales orders are divided into header data and item data. Each order item is assigned separately to a profit center, since this is the finer level of detail.
The profit center assignment is also passed on from the sales order through the logical chain sales order ? delivery note ? goods issue ? billing document. This means that the when the goods issue is posted, the goods usage which corresponds to the revenues is also passed on to the profit center of the sales order.
Each production order is assigned to a plant. Each plant, in turn, is assigned to a company code, which is assigned to a controlling area. This controlling area must be the same as that to which the profit center is assigned.
The transaction data in Profit Center Accounting is stored in the accounts contained in the chart of accounts for your controlling area. These accounts include those from Financial Accounting which are used in Controlling (primary revenue and cost elements) and accounts which occur only in Controlling (secondary revenue and cost elements).
