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Settlement of Internal Orders?
 Question Submitted By :: FI-CO
I also faced this Question!!     Answer Posted By  
# 1
A cost center as you will know is for fixed reporting for a
long time span as part of your company structure (cost
center usually = department or work center).

An internal order is used to accumulate cost for a specific
project or task for a specific time period. An internal
order is therefore used for a short period with a specific

Your internal order will usually settle to cost centers (and
not visa versa) according to the settlement rule in the
order setup.

An internal order can therefore be used to group all the
expenses incurred to plan and hold a conference over a 3
month period. The order can be settled on a monthly basis to
cost centers.

When the conference is finished the order can be settled
finally. The cost of the conference will then be spread over
2 or more cost centers, but can be viewed in total on the
internal order when needed.

It is important to understand the difference between a
settlement and an assessment cycle. An assessment cycle
distributes costs from one cost center to various other cost
centers. You cannot assess from a cost center to an internal
order nor visa versa. Assessment cycles are only between
cost centers.

Settlements are used for orders. In the setup of each order
is a "settlement rule". In this settlement rule you tell the
system to which cost centers the cost in the order must be
Typically, you will execute the following procedure at
1. Settle all orders - this will settle all costs on orders
to cost centers.
2. Run assessment cycles - Now that you have al costs
against cost centers from your orders, you can start
distributing costs between cost centers with assessments.

Costs are posted to an order. When you process a purchase
order you post to the internal order and not to a cost
center. The same applies to journals in FI. You will post
the costs to the order and not to a cost center. You will
then settle the order on month-ends to post to the relevant
cost centers. It is very important to settle these orders
otherwise FI and CO will not
balance on your system.

Internal orders can also be used as "statistical" orders.
This is also specified in the setup of the order. You do not
have to settle statistical orders. When posting costs, you
will post to the cost center and the order simultaneously.
Both have to be specified when posting journals or purchase
orders against statistical orders.

Thank you.
Is This Answer Correct ?    24 Yes 1 No
# 2
Internal orders are many types but Important orders are

1: Real orders
2 Statistical order
3 capital orders

in real orders settlement will be done at month end to
each cost centre

for Statistical orders no settlememt

for Capital orders, since the project is on long run basis,
settlement will be done accordingly.
Is This Answer Correct ?    25 Yes 3 No
# 3
Couple of exceptions to Hannah's otherwise well documented

Costs can be posted either to Cost Centers directly or
internal orders(IO). It is not necessary to go thru IO
always. You also mentioned that Assesment cycles are only
between cost centers..but the INPUTS for Assesments can be
either a Cost Center or Busines process (for activity based
costing) and the OUTPUTS are either Cost Center, Internal
Order, WBS or Business process.
Is This Answer Correct ?    7 Yes 1 No
# 4
I am somewhat confused as to the statement that an Internal
Order can only settle to a cost center and not vice versa.

Here is part of a training excerpt:

Furthermore it is possible that an internal order gets cost
allocated from cost centers thoughdistribution or
assessment. Therefore an internal order is the receiver
instead of another costcenter. The statistical key figures,
which can get posted on an internal order, can be used
askey to allocate the costs.
Is This Answer Correct ?    1 Yes 0 No

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