what is controlling area, cost center, cost element,internal
order & profit center?what does it control?what is
relationship between each other?
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Answer Posted / akesh agrawal
Controlling Area:
An organizational unit within a company, used to represent
a closed system for cost accounting purposes.
A controlling area may include single or multiple company
codes that may use different currencies. These company
codes must use the same operative chart of accounts.
All internal allocations refer exclusively to objects in
the same controlling area.
Profit center:
rofit center is an organizational unit in accounting that
reflects a management-oriented structure of the
organization for the purpose of internal control.Profit
Center Accounting evaluates the profit or loss of
individual, independent areas within an organization. These
areas are responsible for their costs and revenues.
Cost Center:
Cost Centers are the organizational units within a
controlling area that represents a location where costs
occur. Organizational divisions can be done on the basis
of functional, settlement-related, activity-related,
region/section/department related, and/or responsibility-
related, to monitor actual and plan figure standpoints
where cost is captured.
Cost Element:
All Profit and Loss GL account defined in Finance Chart of
account shall be created, as Cost Element This is in order
to avoid Reconciliation of FI and CO module. As soon as
Cost element is created in controlling module one needs to
give Cost object to it. Cost Object could be Material, Cost
Center, Internal Order, Production Order etc.
Two Types of CE:
Primary CE- Primary cost elements, which are based on GL
accounts.
Secondary CE- Secondary cost elements are used only in CO
booking in case of
transfer/allocation/Distribution/Recovery of cost within
Controlling.
Internal Order:
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
deadline.
Cost center, Profit center, Internal order & Cost element
above all under controlling area they are link each other.
they cost object where cost and revenue collect.
If i wrong please let me know right details..
| Is This Answer Correct ? | 92 Yes | 2 No |
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