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Profit Center Accounting

Course Objectives
Understand

the functions in Profit Center

Accounting. Explain Profitability management in SAP. Describe and maintain CO-PCA master data. Identify the source of actual values. Execute planning. Use the CO-PCA information system.

Table of contents
Course Map
Module 1: Overview Module 2: Profitability Management Module 3: Master Data Module 4: Transfer Prices Module 5: Planning Module 6: Actual Data Module 7: Information System

PCA Overview

Profit center accounting, in conjunction with transfer pricing, enables: Structuring of the A Group according to Strategic Business Units (SBUs), leading to:Full Income Statements according to lines of business (Product Groups rolled up to SBU/Sectors) Selected reporting of Balance Sheet items by Product Group/SBU and Sector (e.g. Payables/Receivables, Fixed Assets. Inventories). The ability to reflect material movements between SBUs at commercial prices rather than cost

Terms used in Profitability Management

Accounting Methods
Period Accounting Cost-of-Sales Accounting

Values
Gross Sales Net Sales Variances

Ratios
Return on Investment Margins Economic Profit Cash Flow Contribution Margin

CO Module Overview
CO PA

Profitability Analysis
How profitable are individual market segments?
CO PC

EC PCA

Profit Center Accounting

Overhead Cost Controlling


How can we reduce our overhead?
CO OM

Are the responsibility areas working efficiently? How high are the organisational activity costs? Are they within their budgets? How can we optimise our internal business processes?

Product Cost Controlling

What are the

Manufacturing
Costs of a product?

CO CEL

Overhead Cost Controlling


What costs occur within the organisation?

How Profitable are Individual areas?

CO Components
CO PA

Operating concern (9100 A Grp) Profitability Analysis Profitability Analysis Overhead Cost Controlling
Internal orders

Profitability segment

EC PCA

CO OM

Product Cost Controlling


ControllingProduct Cost A Grp) area (9100 Collector Standard Cost Estimate Cost Element Accounting

Profit Center Accounting

Cost centers

Internal Orders
Activity types

CO CEL

Cost Element Accounting

FI

Financial Accounting Financial Accounting

Asset

Expense

Company Code (9100 A Ltd, 9200 A1 Ltd

Revenues

HR

Human Resources

MM

Materials Materials Management Management

SD

Sales and S&D Distribution

Organisational Units & Master Data


Operating Concern Controlling Area
A Grp Operating Concern (9100)

A Grp Controlling Area (1000)

Profit Centers
Ethylene Propylene Pharma Polyolefins Power Teleco mmuni cation Inform ation techno logy Corporate common

Company Codes

A Ltd 9100

A1 Ltd 9200

HQ 1000

Cost Centers

Purchasing 13

Gen Services 14

Sales and Marketing 15

R&T 16

Other Cost Objects

Orders

Cost Objects

Table of contents
Course Map
Module 1: Overview Module 2: Profitability Management Module 3: Master Data Module 4: Transfer Prices Module 5: Planning Module 6: Actual Data Module 7: Information System

Aspects of Profitability Management


PCA PA

Responsibility Accounting
(Company oriented)

Profitability Analysis By Market segment


(Market oriented)

Profitability Segments 2000 100

Revenue Salaries

2000 468

Revenue Discounts

External Market

Materials
Profit

230

COGS
Contr. Margin Advertising

230
1440

Profit Centers

Procurement

Production

Sales

Distribution

Aspects of Profitability Management

Characteristics

CO-PA costing-based

EC-PCA

profit center

Aims of profitability accounting Calculation of profits

Sales and
profitability controlling

Enterprise controlling

cost-of-sales method

period accounting

and cost-of sales


methods

profit-related Key figures Reconciliation with FI key figures

profit-rel. key fig. balance sheet fig.

posted and imputed values

posted values

Typical Questions in Profit Center Acctng.


Contribution of organizational unit What is the operating profit for a profit center?

Return on capital

What asset value is attributed to A profit center?

Cost management

Which responsibility areas Exceeded their plan for last month?

Management of internal sales & services

What goods and services are exchanged within The corporation?

Responsibility Accounting
Accounts Profit Centers

Reporting Dimensions
Sales Revenue Sales Deductions Cost of Goods Sold Operating Profit Liabilities Accounts Receivables Invested Capital in Assets Inventory Cost of Capital Return on Investment

Determine and analyze profit, balance Answers and financial ratios by Profit Center

Profit
ROI Equity Turnover Return on Sales Economic Profit

Invested Capital

Valuation Views
A Group
Legal
Group

Profit Center

Company 1 A Ltd

Company 2 A1 Ltd

Company 3 A2 Ltd

Profit Center 1

Profit Center 2

You use valuation views to represent different ways of viewing business transactions in a company.
Legal view (Individual enterprise) For transactions between company codes. Group view For a consolidated view of the corporation. Profit center view For business transactions between profit centers.

Parallel Currencies in Profit Center Acctn.


ECPCA

Profit Center Accounting

Company Transaction Code Currency

Special EC - PCA Currency

Currency

Table of contents
Course Map
Module 1: Overview Module 2: Profitability Management Module 3: Master Data Module 4: Transfer Prices Module 5: Planning Module 6: Actual Data Module 7: Information System

Organisational Units & Master Data


Operating Concern Controlling Area
A Grp Operating Concern (9100)

A Grp Controlling Area (1000)

Profit Centers
Ethylene Propylene Pharma Polyolefins Power Teleco mmuni cation Inform ation techno logy Corporate common

Company Codes

A Ltd 9100

A1 Ltd 9200

HQ 1000

Cost Centers

Purchasing 13

Gen Services 14

Sales and Marketing 15

R&T 16

Other Cost Objects

Orders

Cost Objects

Master Data in Profit Center Accounting

Profit Centers Profit Center Groups

Accounts P&L, Balance Sheet Items


Statistical key figures

Master Data - Profit Center (1)


Organizational unit in Accounting that reflects a management-oriented structure of the organization for the purpose of internal control. Profit Center groups are collections of Profit centers with similar characteristics. In the case of A Grp this structure is by Product Group.

Profit Center

Master Data Profit Center (2)

Validity
Period

Company Code

Assignment

Address /
Communications Data

Profit
Center
Basic data

Master Data Dummy Profit Center

Validity
Period

Indicators:
Dummy Profit Center

Dummy Profit Center

Address /
Communications Data Basic data

Collective Master Data Processing


Profit Center
Profit Center Profit Center Profit Center

Mass Processing

Company Code Assignment


Profit Center Comp. Cd1 Ethylene Styrene ..... ..... Comp. Cd2 r r

Master Data Maintenance


Profit Center Ethylene Styrene ..... Depart . Responsible N.N. N.N. XXX YYY

Accounts in PCA
A Grp Chart of Accounts
Financial Accounting

1
Assets

2
Liabilities

3
Equity

Expense Revenue accounts

1
Current financial assets and shortterm capital

NonMaterial Primary Revenue operainventory cost elements ting elements costs, revenue

9
Secondary cost elements

Controlling Profit Center Accounting

Master Data Groups

Cost Elements

Profit Centers

Activity Types

Statistical Key Figures

Cost Elements

Personnel

Fertilizers

R&T PROD. HOURS

Employees

Labour : contract

Wages Salaries

F1

F2 F3

PHR1 PHR2 Tenured Temps

Domestic

Foreign

Profit Center Assignments


Profitability Segment Cost center Profit Center Internal order Production order Sales order

Asset

Material

Monitoring Assignments
Check Assignments for: Not assigned

Materials Cost Centers Orders

Objects per profit center

Profit centers without cost centers

Material fast assignment

Table of contents
Course Map
Module 1: Overview Module 2: Profitability Management Module 3: Master Data Module 4: Transfer Prices Module 5: Planning Module 6: Actual Data Module 7: Information System

Definition of a Transfer Price

A transfer price is a price used to valuate the transfer of goods and services between independent organizational units.

Enterprise Controlling
America Europe Middle East

Asia

Division A
USA UK

KSA
MEX

Division B

BRA

Legal View that of independent legal companies Group View that of the organization as a whole Profit center view - that of the decentralized responsibility areas

Transfer Prices in SAP


CO
Controlling area (Corporate Group)
PCA

ProfitCenter (Negotiated prices)

FI

Company code (Legal View)

Transfer price from the group viewpoint = Transfer price from the profit center viewpoint = Transfer price from the legal viewpoint =

group production costs management price sales and purchase price

Transfer Pricing

Company code 9100 A Ltd


PrCtr1 PrCtr2 L +5 L 70 L 70 G 70 G 70 P 70 P 70 G P 80 80 85 L G P 80 80 85 CCtr 10

Company code 9200 A1 Ltd Company code 9300


PrCtr2 100 85 L 120 G 100 P 120 L 100 G 100 P 85 CCtr 20 PrCtr3 PrCtr3

A3 Ltd

L 120 G 100 P 120

220 220

L G P

220 100 220

Assumed Plan = Actual => No Variances


Ethylene Butene-1 Butene-1 Polyethylene Polyethylene

Transfer prices in PCA


Transfer price 120

Profit Center 1

Profit Center 2

PCA

Material

Production order

120 FI/CO Logistics


Parallel value flows Quantity flow

Table of contents
Course Map
Module 1: Overview Module 2: Profitability Management Module 3: Master Data Module 4: Transfer Prices Module 5: Planning Module 6: Actual Data Module 7: Information System

Profit Center Planning Objectives

Plan Integration
Planning Methods Plan Data Transfer

Plan Integration
Microsoft Excel

Profit Center Plan


Sales 100,000 Discounts 5,000 Cost of Sales 50,000 Marketing Expenses 10,000 Admin. Expenses 15,000 Number of Sales Orders 1,000 .

Internal Order

CO Production Order

Cost Center

Planning methods in PCA


Plan data transfer Excel-Upload Copy existing data Manual entry

New Plan

Plan Allocations

Final Plan

Plan Data Transfer

Plan Profit Center Cost Center Internal / CO Production Order On- line Plan Data Transfer AND/OR Subsequent Postings Revenue 100,000 Marketing 50,000 Admin 10,000 . .

Table of contents
Course Map
Module 1: Overview Module 2: Profitability Management Module 3: Master Data Module 4: Transfer Prices Module 5: Planning Module 6: Actual Data Module 7: Information System

Actual Values Overview

Flow of Actuals in Profit Center Accounting


Overview Flow from Profit and Loss accounts

Flow from materials management Flow from sales and distribution

Flow from Balance Sheet items Period end closing

Flow from Asset Management Transfer of Material Stock Transfer of Work In Process Flow from Accounts payable and receivable

Flow from controlling Period end closing

Flow from Overhead Cost Management Profit Center Document Entry Assessment & Distribution

Actual Values Overview

Flow of Actuals in Profit Center Accounting


Overview Flow from Profit and Loss accounts

Flow from materials management Flow from sales and distribution

Flow from Balance Sheet items Period end closing

Flow from Asset Management Transfer of Material Stock Transfer of Work In Process Flow from Accounts payable and receivable

Flow from controlling Period end closing

Flow from Overhead Cost Management Profit Center Document Entry Assessment & Distribution

Overview of Value Flow in PCA


Profit Center Accounting
V A L U E E F L O W
ECPCA

FI

Primary Costs

COOM

COPA

COPC

Business process

Procurement

Production

Goods Movement

Sales/Billing

MM

PP

MM

SD

Actual Values Overview

Flow of Actuals in Profit Center Accounting


Overview Flow from Profit and Loss accounts

Flow from materials management Flow from sales and distribution

Flow from Balance Sheet items Period end closing

Flow from Asset Management Transfer of Material Stock Transfer of Work In Process Flow from Accounts payable and receivable

Flow from controlling Period end closing

Flow from Overhead Cost Management Profit Center Document Entry Assessment & Distribution

Determination of Profit Centers in P&L


Source Transaction Profit Center

Billing Document Invoice Receipt

Material/Plant of Sales Order Substitution Material/Plant of Purchase Order Material/Plant

Goods Movement

Direct Posting from FI

Indirect /Manual Assignment

Other P&L Accounts

Customized Automatic Account Assignment

Flow from materials management (1)


Material Expense 400000 ECPCA

V A L U E F L O W

500

Material Expense 400000 FI 500 Raw Materials 119400 500


COPC

Material Expense 500

Business process

Consumption Production Order

MM

PP

Flow from materials management (2)


Production Output M. Expense 462001 ECPCA

V A L U E F L O W

450

500

Finished Products 119430 FI 450 Production Output 462001 450


COPC

Production Output 450 -

Business process

Delivery to Stock Production Order

PP

MM

Flow from sales and distribution (1)


ECPCA

V A L U E F L O W

Inventory - Finished Product (FG) 119430 6,028.50-

Stock

FI
Cost of Goods Sold 462002 6,028.50

Change Stock

Business process

Goods Issue

MM

Flow from sales and distribution (2)


Sales

810000 V A L U E FI F L O W
Receivables

ECPCA

10,000

10,000
Sales

810000
10,000

Business process

Sales/Billing

SD

Actual Values Overview

Flow of Actuals in Profit Center Accounting


Overview Flow from Profit and Loss accounts

Flow from materials management Flow from sales and distribution

Flow from Balance Sheet items Period end closing

Flow from Asset Management Transfer of Material Stock Transfer of Work In Process Flow from Accounts payable and receivable

Flow from controlling Period end closing

Flow from Overhead Cost Management Profit Center Document Entry Assessment & Distribution

Determination of Profit Center for B/Sheet


Source Transaction Profit Center

Assets Inventory Values

Cost Center/Internal Order Assignment of Asset Material/Plant

Accounts Receivable Accounts Payable

Material/Plant Account Assignment of Sales order/Purchase Order Customizing Automatic Account Assignment

Other Balance Sheet Items

Flow from Asset management


Building Assets ECPCA PCA

V A L U E F L O W

100

FI
100

On-line Building Assets

Periodic Transfer

Business process

Transaction Processing: Acquisition of Asset

Period End Closing: Transfer of Asset Values

Transfer of Material Stock

Material Stock

V A L U E F L O W

1000

ECPCA PCA

FI

On-line Material Stock 1000

Periodic Transfer

Transfer of Work in Process

WIP

V A L U E F L O W

80

ECPCA PCA

FI
WIP 80

On-line

Periodic Transfer

Flow of value in AP and AR


SD Accounts Receivable 6000 FI

Sales order

Item 1 Profit center A 1000 Item 2 Profit center B 2000 Item 3 Profit center C 3000

1 2

Carry out period -closing activities for payables and receivables in FI (payables and receivables are split according to profit center) Run transfer program in Profit Center Accounting

ECPCA

A/R Profit Center A 1000

A/R Profit Center B 2000

A/R Profit Center C 3000

Actual Values Overview

Flow of Actuals in Profit Center Accounting


Overview Flow from Profit and Loss accounts

Flow from materials management Flow from sales and distribution

Flow from Balance Sheet items Period end closing

Flow from Asset Management Transfer of Material Stock Transfer of Work In Process Flow from Accounts payable and receivable

Flow from controlling Period end closing

Flow from Overhead Cost Management Profit Center Document Entry Assessment & Distribution

Transfer from Controlling (1)


Auto Expenses

V A L U E F L O W

450017

ECPCA

FI
Auto Expenses 450017 500

500

CO OM

Vendor 500 Auto Expenses 500

Business process

Transaction Processing: Post Vendor Invoice

Transfer from Controlling (2)


Cost Center 1 Cost Center 2

ECPCA Profit Center 2

V A L U E F L O W

Profit Center 1

500

500

COOM

R&T PROD. HR. - 500

5 hours

COOM

R&T PROD. HR. 500

5 hours

Business process

Transaction Processing: Internal Activity Allocation

Profit Center Document Entry


Statistical Key Figure
General costs to R&T. General costs to R&T.

V A L U E F L O W

Profit Center 1

8000

8000

ECPCA Profit Center 2

Business process

ECPCA

Period End Closing:

Assessment
.

ECPCA Profit Center 1112


Butadiene .

V Profit A Center 7000 L U Others/ E Allocations F L O W

Profit Center 1114


Benzene

ECPCA

Business process

Period End Closing: Assessment

Table of contents
Course Map
Module 1: Overview Module 2: Profitability Management Module 3: Master Data Module 4: Transfer Prices Module 5: Planning Module 6: Actual Data Module 7: Information System

Information System Overview


Master Data Index

Summary Records

Interactive Reporting

Listoriented Reports

Line Item Reports

Report Output Types


Interactive Reporting Variable output areas Navigation tree / drag & drop Cumulative display functionality

List Oriented Reports

Interface Report-to-Report Printing options Integration with MS Office

Course Summary
You should now: Have an understanding the functions in Profit Center Accounting. Explain Profitability management in SAP. Describe and maintain CO-PCA master data. Identify the source of actual values. Execute planning. Use the CO-PCA information system.