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Table of Contents
1 Introduction to Controlling .............................................................................................. 2
1.1 Differences between FI & CO ........................................................................................ 2
2 Organization structure ................................................................................................... 3
2.1 Organization structure ................................................................................................... 3
3 Business scenario (Case study)..................................................................................... 5
4 Limitations of Financial accounting ................................................................................ 5
5 Understanding important vocabulary ............................................................................. 6
6 Controlling Basic Settings Configuration ........................................................................ 7
6.1 Create Controlling Area ................................................................................................. 9
6.2 Maintain Number ranges for controlling documents ..................................................... 11
6.3 Maintain Number ranges for controlling documents ..................................................... 13
7 Cost Element Accounting............................................................................................. 15
7.1 Cost Element Report ................................................................................................... 19
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CHAPTER 23 CONTROLLING BASIC SETTINGS
1 Introduction to Controlling
Controlling provides you with information for management decision-making. It facilitates
coordination monitoring and optimization of all processes in an organization. This involves
recording both consumption of production factors and the services provided by an organization.
All data relevant to costs flows automatically from Financial Accounting to Controlling. As part of
this process, the system assigns costs and revenues to different CO account assignment
objects like cost centers, profit centers, internal orders etc.
FLEXIBILITY
Internal Accounting
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CHAPTER 23 CONTROLLING BASIC SETTINGS
Listed below are a few differences between FI and CO
3.Generates P&L , BS and Cash flow 3. Generates internal reports for decision making
statements and analysis
2 Organization structure
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CHAPTER 23 CONTROLLING BASIC SETTINGS
Operating Concern
The Operating concern is the highest level of Profitability and sales and marketing
controlling and the central organizational unit in Profitability Analysis (CO-PA) used to
segment and structure the market.
Several Controlling Areas can be assigned to an Operating Concern. In turn one or more
company codes can be assigned to each of these controlling areas.
The main areas in Controlling are used for different tasks and types of analysis:
Cost Element Accounting classifies the costs and revenues posted to CO. It also enables
the reconciliation of the costs in CO with Financial Accounting (FI).
Overhead Cost Controlling examines the causes of costs in the functional areas of an
enterprise. In many enterprises, overhead costs have increased rapidly. These include
costs that cannot be directly assigned to a product or a service. While strong progress has
been made for controlling costs and optimizing processes in the production areas, the
overhead costs remain unclear, meaning that it is difficult to judge what caused these
costs. Activity Based Costing (ABC) provides you with more ways of allocating costs.
Product Cost Controlling is used for costing and evaluating the cost of goods
manufactured for a product, and the costs and possibly revenues when providing a service,
or when carrying out a project (plan and actual). This provides the tools for a
comprehensive analysis of the value added processes in an enterprise.
Profitability Analysis deals mainly with analyzing the results of enterprise activities on the
external market. It enables you to determine how successful the enterprise is in different
market segments (product divisions or customers for example) and how this data has
developed over a period of time.
Profit Center Accounting analyzes the success of the subareas in the enterprise which
are responsible for profits. It can represent the internal market in the enterprise, particularly
if the functions of multiple valuation approaches and transfer prices are used.
The cost flow in CO can mean the need for reconciliation between internal and external
accounting. In Cost Element Accounting, the reconciliation ledger provides reporting
functions for identification of the cost differences between FI and CO. It can also be used
for reconciliation posting to Financial Accounting (FI) if required.
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Let us take a scenario where ABC Group has a Plants and other departments to
manufacture Televisions and Washing Machines.
This is how the layout looks like.
The management wants to know the total cost incurred in a month in Canteen/Stores&
assembling etc.
Is it possible to get that data from FI ?
It is not possible this in FI, Hence we need to use controlling module in SAP
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CHAPTER 23 CONTROLLING BASIC SETTINGS
Cost Centers: They represent the areas where costs are incurred/ collected. Generally for
every cost center there is a person who is responsible for all the costs incurred in his/her CC’s.
You can set up cost centers based on functional requirements, distribution criteria, activities
provided, geographical factors, and /or areas of responsibility.
Cost Elements: They describe the origin of costs. Cost elements can be either primary (flow
from FI) or secondary ( arise in Co). Primary cost elements arise through the consumption of
production factors that are sourced externally. Secondary cost elements arise through the
consumption of production factors that are provided internally (that is by the enterprise itself)
Activity Types: Categorize production and service activities provided by a cost center to the
organization and used for allocating costs of internal activities to the beneficiary of the costs.
Statistical
Statistical Key Figures (values that describe a cost center) are used as the basis (tracing
factor) on which to make allocations (assessment, distributions) and to analyze SKF’s.
Master data Groups: You use master data groups to summarize the various types of master
data in cost center accounting for analysis, planning, and allocation purposes.
Standard hierarchy: The standard hierarchy is a classification structure to which all cost
costs centers within a controlling area must be assigned. You can structure/classify your costs
centers to meet your requirements.
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CHAPTER 23 CONTROLLING BASIC SETTINGS
The controlling area is the basic organizational unit in Controlling. A controlling area is a
closed entity used for cost accounting. You can only allocate costs within a controlling area.
These allocations cannot affect objects in other controlling areas. You can assign more than
one company code to a controlling area. This enables cost accounting across company
codes.
Note: The controlling area and its company codes must always use the same chart of
accounts and the same fiscal year. (only the number of special periods may vary).
Profitability Analysis (CO-PA) is used within the operating concern. The operating concern
is an organizational unit that represents the structure of external market segments for the
enterprise. You can assign several controlling areas to each operating concern, for the
purpose of analyzing them together.
The company code is an independent accounting unit. Financial and profit & loss statements
are prepared at company code level to meet legal reporting requirements. Business areas
(BA) can be used to group strategically business fields, and for reporting in the form of P&L
and financial statements (not suitable for auditing, reporting purposes only). Business areas
can also be cross-company code.
The plant represents a production unit. It represents the central organizational unit in R/3's
Materials Management and Production Planning. When you define organizational structures,
you assign plants to company codes.
The purchasing organization is an organizational unit of MM Purchasing and the sales
organization is an organizational unit in SD Sales & Distribution. Both are only important for
CO in that this data needs to be included for integral business processes between Logistics
and Accounting.
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Multiple Assignment
CO Profitability
Profitability EC-
PA Operating
Analysis Concern
Analysis Currency: EURO PCA
CO
By assigning more than one company code to a controlling area, you can perform cost
accounting for all company codes. You can allocate values in CO that affect more than one
company code.
In cross-company code cost accounting, the controlling area and the company codes can
have different currencies. The currency of the controlling area can be the same as that for a
company code. It can also differ from the currency of all the company codes assigned to the
controlling area.
You can use three currencies in CO:
Controlling area currency
Company code currency OR object currency
- Cross-company code cost accounting defaults the company code currency as the object
currency. You cannot change this default. If you have only assigned one company code
to the controlling area, the object currency can be assigned for each controlling object
(such as a cost center) as required.
Transaction currency
- The transaction currency is the currency used for posting a document to CO.
You can assign more than one company code to a single controlling area. All companies in
the controlling area must then use the same operative accounts. However, these accounts
can be linked to country-specific accounts using the alternative account number that is stored
in the master data record for accounts.
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If you have already created master data, you cannot then remove the company codes already
assigned. However, you can assign more company codes to the controlling area.
Internal Order
Product Costing
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Primary Cost Elements are those which are created from FI general Ledger Accounts and
impact the financial accounts e.g. Travelling expenses, consumption account in fact any Profit
and Loss GL account. Primary cost elements are those whose cost origin is outside controlling
module.
Secondary Cost Elements are those which are created only in controlling and do not affect the
financials of the company. It is used for internal reporting only. The postings to these accounts
do not affect the Profit or Loss of the company. Secondary cost elements are used to allocate
cost within controlling module.
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