Controlling ::: Org Structure

Controlling:

Org Structure:

      Client
            |
Operating Concern
            |
Controlling1   Controlling 2
            |
Co. Code 1      Co.Code2

Controlling: Controlling is nothing but a organizational structure with cost accounting environment where revenues and costs are monitored controlling is used for minimize the cost.

If an organization divides their accounting operations into i.e. Internal Accounting and External Accounting.
Controlling represents an internal accounting
Controlling provide with information for management decision making.
It facilitates co-ordination, monitoring and optimization of all process in an organization.
Controlling involves recording both the consumption of production factors and the services provided by an organization

Sub Modules in Controlling
  1. Cost Element Accounting
  2. Cost Center Accounting
  3. Internal orders
  4. Activity Based Costing
  5. Product Costing
  6. Profitability Analysis
  7. Profit center Accounting.

Controlling Area: It is a highest organizational unit in controlling. One controlling area can be assigned to many co. codes
All the co. codes can maintain different currency, no problem, but all the co. codes has to maintain same operating chart of accounts and fiscal year.

-If we assign more than one co. code to one controlling area, then we need to note the following points
            1. We need to use a consistent chart of accounts i.e. same operating COA
2. The fiscal year variant in co code must match the fiscal year variant in  the        controlling area.
3. You should execute period end closing in controlling for all company codes at the same time.
            Other wise would be too much time consuming.
            Whenever execute period end closing, it possible only after closing FI.
4. If you use one controlling area, you can use only one operating concern.

**** Cross company code controlling postings that can be displayed in the reconciliation ledger.

Assignment of Controlling Area to Plant:
            Each plant is assigned to company code
            As a company code is assigned to a controlling area.
            We can also easily derive the relationship from the controlling area to plant.
                                    Controlling
                                                |
                        Company code1          Company Code 2
                                    |        \              /           |
                        Plant                Plant                Plant

Versions: We can used versions to create independent data groupings in planning and in actual.         *versions are defined at client level
Operating Concern:  It is the highest hierarchy in controlling profitability analysis (COPA). All the controlling areas can be assigned to operating concern to get the profitability as per market segment.

            An operating concern is the central organizational structure in profitability analysis.
            Each operating concern represents an area in which a market segment of a business can be monitored and its profitability analyzed.
            A corporate group usually maintains only one operating concern. This operating concern is assigned to all existing controlling areas.
            That assigns their cost to that operating concern. Revenues are assigned directly to Operating concern from FI.

Operating concern can be created at
                        *Controlling level or above
                        *Company code level or above.

Cost Center Accounting: Cost Center is a area of responsibility where costs are incurred. Cost center represents a small unit of responsibility with in the organizational structure.

Cost Element Accounting: It describes origin of cost. Cost element is used for representing specific costs incurred by the organizations. Where actual expenditure takes place.
Cost element classifies the organizations valuated consumption of production factors within a controlling area

CEA is two types
  1. Primary Cost Element: Primary cost element can be created for FI & CO. Direct posting a fixed amount to an account by specifying account no.
Primary cost element generates an account of consumption of production factor externally. Here allocation & settlements possible. When ever you are creating primary cost element, it can be corresponds to GL accounts.

  1. Secondary Cost Element: It origins at an account of production factor internally. Secondary cost element does not corresponds to any GL account in FI
Here allocations are possible, settlements are not possible
System determines an account automatically while posting. No account number is allowed is to be posted.

Cost Element Category: The classification of cost elements according to their usage or origin.
            e.g. material cost element
                   Settlement cost element for orders
                  Cost element for allocating internal activities.

Cost Element Category Types:
1-Primary cost/cost reducing revenue
3-Accrual/deferral per charge
11-Revenues
12-Sales Deduction
22-External settlement.
Cost Element group: Cost Element group is an organizational entity that combines cost elements of the same type.
            e.g. can be used reporting purposes.

Revenue Element: An object that records the value of operating sales within the controlling area.
            Each revenue element corresponds to a revenue account in a chart of accounts.

Primary cost element can be created FI level (FS00) and CO level (KA01).
Functional Area: Functional area used to categorize an organization according to functional aspects such as Manufacturing, administration, sale & distribution, R&D etc.

Cost Center: Cost Center is an organizational unit within the controlling area that represents a location of cost incurrence.
            -Functional Requirements
            -Allocation criteria
            -Physical Location
            -Responsibility for costs.

Cost Center Category: An attribute that determines the type of cost centers.
e.g       -Production cost centers        
            - service cost centers.
            -Administration cost center
            -Development cost center
            -Logistics cost center.

Cost Center Hierarchy: That indicates hierarchy of cost center groups in which all cost centers within the controlling area.
            e.g. its use consolidation reports.

Cost Center Tab: (KS01) Basic data, control, templates, address, and communication, history.

Cost Center Group: A hierarchical group of cost centers and organized according to selected criteria.

Internal Orders: This will be useful to know item wise cost like Raw material consumption for a particular period. To monitor collect the cost internal orders are used.
Internal orders are used to plan, collect & settle the cost of internal jobs and tasks.
            Internal orders are used to plan, collect and analyze the cost arising from internal activities.
            Internal orders are used for the following purposes.
            *Monitoring the costs of short-term-jobs.
            *Monitoring the cost and revenues of a specific service.
            *Ongoing cost control.
e.g. to know the cost of individual activities. i.e. telephone cost.

Internal Orders Categories:
  1. Overhead Order: For short-term monitoring of the indirect cost arising from jobs. They can also be used in continuous.
  2. Investment Order: Monitor investment costs that can be capitalized and settled to fixed assets.
  3. Accrual Orders: period Based
  4. Order with revenues
  5. Model order.

Object Class: The object class categories the object in the controlling application component according to their managerial purpose and makes it possible to analyze flows of costs according to managerial aspects.
The R/3 system contains the following object classes
-overhead cost
-production
-investment
-profit analysis.
**Object class is used to classify controlling object such as cost centers, orders and cost objects and to display the cost flow within controlling from a business prospective.

Order Type: The order type sub-divided orders, according to their purpose.
*Each order type contains numerous pieces of information which are necessary to managing the orders.
*Order types are defined at client level
e.g. Production order, maintenance order, capital investment order, marketing orders.

Real Orders: Real orders are the cost objects. Later we have to do settlement to the particular receiver object.
            e.g. Vehicle is used for all departments.
The expenses incurred for maintaining that vehicle will be added to the order. Based on the mileage used by each department, we can settle the expenses to different cost centers by using statistical key figures.

Statistical Orders: These are used for information purpose. Settlements are not possible here. E.g. create statistical order for each account wise.



Profit Center: It’s an opportunity to know the profit for a particular product; product wise, location wise, business area wise. We will create profit center or to know individual profit for each product we use or profit center is the management oriented organization unit used for internal controlling purpose. We have to segregate the each product cost into different profit centers. To analyze the area of responsibility we will create profit center.

Activity Type: It defines main functions and services provided by a cost center & used as cost object like cost center internal orders etc.

Re-Post Line Item:
            When we want to transfer amount from one cost center to other cost center with out FI entry, we use repost line item.
            It takes must FI reference documents.
Re-Post Cost: If you want to transfer amount from one department to other department
            e.g. Cost from service to Production.

Statistical Key Figures: These are certain non financial statistical data measured for a cost center which when compared tot hat total of such data of all cost center yields a ratio that can be used for allocation or planning.

Assessment: This is used for allocation of costs transferring primary and secondary cost from sending cost center to receiving cost objects.

Distribution: This is used for allocations of primary cost to cost center. The receiving cost center will have the information on primary cost elements. The procedure is similar to period reposting.

Product Cost: Valuation of Inventories will be done (W-I-P, Finished Goods).

Profitability Analysis: This is meant for decision making and reporting purpose. To know the profitability product wise, sales organization wise, customer wise we use it.
            Analyze the profit or loss of an organization according to individual market segment.
            Profitability Analysis provide on the basis of Decision making, Customer Selection, Price determination.
            Analyzes the profit or loss of an organization according to individual market segment.
           
Profitability Segment:
-The operating concern is divided into individual market segment for which profitability analyses can be carried out.
-In profitability segment is defined by a combination of characteristic values.
            e.g. Customer, sales organization, Distribution Channel, Product, Divisions etc. are the Characteristics.
Object of Co-PA: is to support sales product management, corporate wide planning and decision making using external view from a market oriented perspective.
-*Normally the largest amount of data transferred into CO-PA is from SD billing Doc.

These are two types:

  1. Costing Based Profitability Analysis: This type of analysis is primarily design to let you analyze profit quickly for the purpose of sales management.
CO-PA is not updated until the billing document is created, at which time COGS, revenues, discount, freight and etc..

**When ever we are following cost based CO-PA value fields must. The value fields     contain amount and quantities that were updated or planned for particular.


  1. Accounting Based Profitability Analysis: This type of profitability analysis enables you to reconcile cost and financial accounting at any time using accounts.
Account based CO-PA created to allow to users to reconcile CO-PA data to FI data.
It captures values according to the account posted to instead of values fields.
In account based CO-PA, COGS is updated in CO-PA at the time of delivery (goods Issue), remaining updated at the time of billing.
 The Main difference of Acct based COPA and Costing Based COPA

                       |--------  Acct----- Delivery
COGS---------|
    (Updated in COPA)|--------Cost------Billing
*****WE can assign multiple controlling areas to One Operating Concern.
***Operating Concern is the highest level hierarchy in controlling.

Derivation Rule: All characteristics are populated via derivation. A rule that you define in characteristics derivation using ‘If-Then’ logic, which controls how certain target characteristic values are derived automatically from source characteristics values.
e.g. Derive “sales Region” from Country
                                    |                       |
                        Characteristic        Source.
Source Fields:
you can used the following operating concern fields as source fields.
e.g. All fixed characteristics.
            All user defined characteristics
            All characteristics copied from SAP tables.
Target Fields: All the user defined characteristics and all copied from SAP tables



Validation: A validation is a valuable tool that can be used in many of the financial, controlling and asset accounting.
Validations are used to check settings and return a message if the perquisite checks condition is not met.

Substitution: Substitutions are similar to validations; they actually replace and fill in field values behind the scenes without the user’s knowledge unlike validations that create on-screen message to the user.

Client Copy: This application in particular to copying the entire customizing environment of the source client to target clients either within one sap system or to a different sap system.

User Exit: Customer Enhancements
A point in an sap program where a customers own program can be called.

Customer Enhancement: An adjustment to the standard sap system, requested by the customer.
SAP designs empty modification modules at particular points in the standard system where customer enhancements are anticipated. These modules known as exits.

Sand Box Client: Accelerated SAP. In the development system, a client other than the official customizing client, used for testing the applications and customizing function.
It is created as a copy of the SAP reference client (000) the entire implementation team has access to this client for experimentation and education. The sand box client can be used to test changes to essential structures, such as the number of company codes and to ensure that these changes will work.

**we raise invoice, local currency i.e. company code currency f-43
            We clear invoice with foreign currency f-53
            Steps: define reason code obbe
                        Define account for payment difference obxl  i.e. automatic transfer for payment difference.

Statistical Key Figures: Statistical values describes in cost centers internal orders, business processes and profit center accounting
            There are two types of statistical key figures i.e. fixed values and total values.
Fixed Values: Fixed values are carried forward from current posting period to all subsequent serials.

Total Values: Total values are posted in the current posting period only.

Creation of statistical Key figures screen  KK01

Statistical Key figures unit may be by way of measuring H-Hours, Ea-Each and
LBS-Pounds.
Account Determination (CO): A procedure that determines adjustment accounts for reconciliation posting between CO and FI manually or automatically by means of substitutions.
(FI) An automatic function that determines the accounts in posting amounts in financial accounting.

Reconciliation Ledger: Reconciliation ledger used for summarized display of values, that appear in more detailed from in the transaction data.
Function: Reconciles controlling with financial accounting
                Provides an overview of all costs incurred.
                In CO area activate the R.Ledger OKKP
                In case you don’t want to activate KALB

Cost Objects: The unit of output resulting from the value added process with which costs are identified according to how they are incurred.
            i.e. 1. Provided cost conductors.
                  2. Production orders.
                  3. Process orders.

What are the Controlling Objects?
-cost center
-orders
-projects
-networks
-Sales Orders
-Cost Objects
-Profitability segment
-Business process

What are the Basic setting in your client?
-Chart of Accounts
-Fiscal Year
-Currencies.

Account Assignment Objects: Assigning the information from GL accounts to the controlling objects using account assignment objects.

GL acct  -----  Cost Object
Salary Acct     Cost Center i.e. Service cost center

Profit Center Accounting: Profit center accounting is an organizational unit in accounting that reflects a management oriented structure of the organization for the purpose of internal control.
Purpose: Operating results from profit center can be analyzed using either the cost of sales approach or the period accounting approach.

Difference Between the Cost Center and Profit Center

Cost Center Represent a location of cost incurrence
Cost Center responsible only reduction of cost.
Profit center determine profit or loss from particular segment.
Profit center responsible both costs and revenues.

Business Area vs. Profit Center

Both are responsible for particular segment wise report.
But Profit center is used for only internal purpose, where business are is used for external purpose. And where in Business area we can get the reports segment wise only, where in profit center we can get the reports product wise, segment wise etc..

Dummy Profit Center: Data is posted to the dummy profit center, when the original account assignment of cost object is not assign to any profit center, then later the data transfer from dummy profit center to the current profit center through assignment of distribution.

MM to FI Integration:

Valuation Class: Assignment of a material to a group of GL accounts.
The valuation class determines the GL accounts that are updated as a result of a valuation relevant transactions or event such as goods movements.
The Valuation class it Possible to:
** Post the stock values of materials of the same material type to different GL accts.
**Post the stock values of materials of different material types to the same GL accts.

Material Type: A grouping together of materials with the same basic attributes such as raw materials, semi finished product, and finished products.

Account Determination: An automatic function that determines the accounts in posting amounts in financial accounting.

Material Movement Type: A classification key indicating the type of material movement.
e.g. Goods receipt, goods issue, physical stock transfer.

The Movement type enables the system to find predefined posting rules determining how the accounts of the financial accounting system are to be posted and how the stock fields in the material master records are to be updated.

The link between the valuation class and the material types is setup via the account category reference.
The account category reference is a combination of valuation classes. Precisely one account category reference is assigned to a material type.
There are two types of Price control in the SAP R/3 System:
V-Moving Average Price: Price that changes in consequence of goods movements and the entry of invoices and which is used for valuating a material.
S-Standard Price:  Constant price with which a material is valuated without taking into account goods movements and invoices.

**For each material, you must specify the price control in the material master record according to which the material is to be valuated. You can do so using the price control induction.

Process:
  1. Define valuation class in material master in MM screen  OMWB
  2. Account code define in GL at valuation class in materials.  OBYC
  3. Define the account determination key.
  4. Define workflow variant releasing the same for account through FI module.
  5. Define GR/IR clearing account in GL and post material to the stock account.
  6. Verification of vendors invoice for material through MM Screen.

Movement Type
            |
Account Category reference
            |
Valuation Class
            |
Valuation Area
            |
Valuation Grouping Code
            |
        Cost
            |
Transaction Key
            |
Account Modification

BDC: Batch Data Communication is the method of transferring data from the legacy system to SAP information tables.
Use of BDC: The entire data from the legacy system is converted into a flat file.
This flat file is then converted into internal tables using ABAPers help.

How do you extend cost center from another period?
Ans: At the time of creation of cost center select “ Valid from Period to Period” at KS01.





Assessment vs. Distribution:

Assessment:
  • Sender cost centers are credited with a special secondary cost element.
  • Receiver cost centers are debited with the same assessment cost element.
  • Information on senders and receivers is contained in the document.
  • List of origins is not maintained in the cost accounting document.
  • Primary & secondary cost elements will be settled here.
Distribution:
  • Re posting of primary costs.
  • Sender cost centers are credited with a primary cost element.
  • Receiver cost centers are debited with a primary cost element.
  • Only the Secondary Cost elements can be settled here.

Controlling Area Currency:
If we select co.code-co area field, R/3 uses the default setting of 10, i.e. company code currency.
**If we select cross company cost accounting, then use any currency.
Company code Currency – 10: If you want company code currency , must be maintained all company codes same currency.
Any Currency – 20
Group Currency – 30: It is maintained at client level, use this option to reconcile FI and CO ledgers.
Hard Currency – 40
Index Currency – 50

Global Currency – 60

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