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Date

Training Center Instructors

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Management Accounting I

mySAP ERP Financials

Education Website

Participant Handbook

Course Version: 2006 Q2 Course Duration: 5 Day(s) Material Number: 50080818

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Copyright

No part of this publication may be reproduced or transmitted in any form or for any purpose without the express permission of SAP AG. The information contained herein may be changed without prior notice.

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THESE MATERIALS ARE PROVIDED BY SAP ON AN "AS IS" BASIS, AND SAP EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS OR APPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THESE MATERIALS AND THE SERVICE, INFORMATION, TEXT, GRAPHICS, LINKS, OR ANY OTHER MATERIALS AND PRODUCTS CONTAINED HEREIN. IN NO EVENT SHALL SAP BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES OF ANY KIND WHATSOEVER, INCLUDING WITHOUT LIMITATION LOST REVENUES OR LOST PROFITS, WHICH MAY RESULT FROM THE USE OF THESE MATERIALS OR INCLUDED SOFTWARE COMPONENTS.

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About This Handbook

This handbook is intended to complement the instructor-led presentation of this course, and serve as a source of reference. It is not suitable for self-study.

Typographic Conventions

American English is the standard used in this handbook. The following typographic conventions are also used.

Type Style Example text Example text EXAMPLE TEXT Example text Example text <Example text> Description

Words or characters that appear on the screen. These include field names, screen titles, pushbuttons as well as menu names, paths, and options.

Also used for cross-references to other documentation both internal (in this documentation) and external (in other locations, such as SAPNet).

Emphasized words or phrases in body text, titles of graphics, and tables

Names of elements in the system. These include report names, program names, transaction codes, table names, and individual key words of a programming language, when surrounded by body text, for example SELECT and INCLUDE.

Screen output. This includes file and directory names and their paths, messages, names of variables and parameters, and passages of the source text of a program.

Exact user entry. These are words and characters that you enter in the system exactly as they appear in the documentation.

Variable user entry. Pointed brackets indicate that you replace these words and characters with appropriate entries.

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About This Handbook

Icons in Body Text

The following icons are used in this handbook.

Icon Meaning

For more information, tips, or background

Note or further explanation of previous point

Exception or caution

Procedures

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Indicates that the item is displayed in the instructor's presentation.

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Course Overview ... vii

Course Goals ...vii

Course Objectives ...vii

Unit 1: Organizational Units ... ... 1

Components of Management Accounting ...2

Unit 2: Master Data ... 23

Cost Centers... 25

Cost elements ... 41

Activity Types ... 50

Statistical key figures ... 61

Global Functions For Master Data... 69

Unit 3: Event-Based Postings... 97

Entering Primary Postings ... 98

Reports in Cost Center Accounting... 110

Account Assignment Tools...124

Adjustment postings ...129

Direct Activity Allocation ...140

Unit 4: Period-End Closing ... 155

Accrual Calculation ...157

Entering Statistical Key Figures...170

Periodic Reposting...179

Cost Allocations ...194

Reconciliation Ledger ...253

Period Lock ...266

Unit 5: Internal Orders: Overview... 273

Using Overhead Orders...274

Real and Statistical Orders ...277

The Different Scenarios for Internal Orders ...280

Unit 6: Master Data of Internal Orders ... 287

Master Data Maintenance ...288

Status Management for Overhead Cost Orders ...297

Grouping and Collective Processing ...307

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Contents TFIN20_1

Unit 7: Event-Based Postings... 319

Event-Based Postings Within and Outside Management Accounting ...320

Commitment Management ...329

Unit 8: Period-End Closing of the Internal Orders ... 345

Periodic Debit Postings ...347

Periodic Credit Postings ...361

Settlement: Special Subjects...381

Unit 9: Planning, Budgeting and Availability Control ... 387

Budgeting and Availability Control ...388

Unit 10: Information System ... 403

Report Painter ...404

Data Source ...410

Unit 11: Master Data... 423

Control ing Area Settings ...424

Master Data...433

Profit Center Assignments ...448

The New General Ledger ...465

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Course Overview

This course covers master data, process-related postings, period-end closing in Overhead Cost Controlling (cost center accounting and controlling with internal orders), and the derivation of cost centers.

Target Audience

This course is intended for the following audiences:

• Solution consultants who are responsible for the implementation of

Management Accounting with mySAP ERP Financials.

Course Prerequisites

Required Knowledge

• SAP125 SAP Navigation

• ERP001 Management Empowered by mySAP ERP

• ERP020 Management Empowered by mySAP ERP Financials

Recommended Knowledge

• None

Course Goals

This course will prepare you to:

• Set up Overhead Cost Controlling with mySAP ERP Financials.

• Understand the derivation of profit centers.

Course Objectives

After completing this course, you will be able to:

• Set up Overhead Cost Controlling with mySAP ERP Financials. This

includes the posting of actual costs from preceding components and the carrying out of period-end closing.

• Understand the derivation of profit centers.

SAP Software Component Information

The information in this course pertains to the following SAP Software Components and releases:

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Course Overview TFIN20_1

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Unit Overview

Unit 1

Organizational Units

In this chapter, we will explain the organizational units that are the basis of Management Accounting, as well as the options available for configuring organizational units in Overhead Cost Controlling.

Unit Objectives

After completing this unit, you will be able to:

• Describe the organizational units on which Management Accounting is based

• Explain the options available for configuring organizational units in

Overhead Cost Controlling

Unit Contents

Lesson: Components of Management Accounting ...2 Exercise 1: Organizational Units ... 13

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Unit 1: Organizational Units

Lesson: Components of Management Accounting

Lesson Overview

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You will become familiar with the organizational units that are the basis of Management Accounting. We will explain the options available for configuring organizational units in Overhead Cost Controlling.

Lesson Objectives

After completing this lesson, you will be able to:

Business Example

You invite the Financial Accounting project team to a meeting on the organizational structure of accounting within the IDES group.

Although your focus is Overhead Cost Controlling, you need to discuss accounting as a whole in order to understand the way the different application components are linked.

You also need to discuss the configuration options available for Overhead Cost Controlling, and the specific settings that are recommended to determine the optimum structure for your enterprise.

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TFIN20_1 Lesson: Components of Management Accounting

Financial Accounting and Management Accounting:

Standard versus Flexibility

Figure 1: Financial Accounting and Management Accounting: Standard versus Flexibility

The mySAP ERP Management Accounting application component contains all accounting functions necessary for effective controlling. If a company divides its accounting into internal and external accounting, Management Accounting is internal accounting since it provides those responsible for managing and controlling the company's operations with necessary information. CO provides all controlling options and is not restricted by legal requirements.

In Financial Accounting companies need to create financial statements such as balance sheets and profit and loss statements. This external reporting has to be in line with standards and certain legal requirements.

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Components of Management Accounting

Figure 2: Components and Value Flows in Management Accounting

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Management Accounting provides information that management can use to

make decisions. It facilitates the coordination, supervision and optimization of all processes within a company. This involves recording both the consumption of production factors and the services provided by an organization.

Any data that is relevant to costs flows automatically from Financial Accounting to Management Accounting. Costs and revenues are assigned to different CO

account assignment objects such as cost centers, business processes, projects,

or orders. These Financial Accounting accounts are managed in Management Accounting as cost or revenue elements.

You use Cost Center Accounting for controlling purposes in your organization. It is an ideal means of monitoring overhead costs and assigning them to the organizational units that incurred the costs.

Product Cost Controlling calculates the costs incurred when a service is provided

or a product is manufactured. It enables you to calculate the minimum price at which a product can be profitably marketed.

Profitability Analysis analyzes the profit or loss of an organization according to

individual market segments. In Profitability Analysis, costs are assigned to the revenues of each market sector. This gives you a basis for calculating prices, targeting customers, determining conditions, and choosing sales channels, for example.

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Overhead costs are costs that cannot be directly assigned to the manufacture of

a product, or the provision of a particular service. You assign all overhead costs to the locations at which they were incurred, or to the activities from which they arose.

Cost centers are separate areas within a controlling area at which costs are

incurred. You can create cost centers according to various criteria including functional considerations, allocation criteria, activities provided, or according to their physical location and/or management area.

An activity type defines the type of activity that can be provided by a cost center.

Activity outputs supplied by one cost center (the sending cost center) to other cost centers, orders, or processes, represent the utilization of resources for this sending cost center. You valuate activities using a price calculated on the basis of certain business or management information.

Business processes combine activity flows within an organization across

individual cost centers. Business processes can be used to control organizational processes in line with particular functions.

Internal orders are used to plan, collect, and analyze the costs arising from

internal activities.

There are different methods for allocating values and quantities, depending on the type of Management Accounting object. In an enterprise scenario in which only costs are allocated, at period end you can use plan/actual comparisons to analyze costs. When allocating quantities, you can use extended analysis tools at period end, which take operating rate into account.

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Organizational Units

Figure 3: Organizational Units

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The operating concern is the highest reporting level for profitability and sales and marketing controlling, and the central organizational unit in Profitability Analysis (CO-PA) used to segment and structure the market.

Controlling areas structure the internal accounting operations of an organization

within Management Accounting. They represent closed units that are used to calculate costs. All internal allocations relate solely to objects that belong to the same controlling area.

Company codes are independent accounting units within Financial Accounting.

They represent the smallest organizational units for which an account group can be set up for the purposes of external reporting. The process of external reporting involves recording all relevant transactions and generating all supporting documents for financial reports (such as balance sheets and profit and loss

statements).

The business area is an organizational unit within Financial Accounting that represents a particular level of operations and managerial area within a company. You can assign Financial Accounting transactions to a particular business area. In Financial Accounting you can generate internal balance sheets and profit and loss statements on the basis of business areas.

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The plant is an organizational unit within Logistics. It is used to break an organization down according to production, procurement, plant maintenance, and material planning considerations. Plants are used in Materials Management, Logistics, and Production Planning and Control. In a plant either materials or goods are manufactured, or services are provided.

Customizing Controlling Area

Figure 4: Customizing Controlling Area

The controlling area is the organizational unit within a company for which complete, closed cost controlling can be carried out. You cannot allocate costs outside of controlling areas.

The controlling area “0001” is created in the SAP standard version. You can use these as copy templates.

The settings you make for your controlling areas must reflect the organizational controlling structure of your company.

A controlling area may contain more than one company code and these company codes can include more than one currency. However, the company codes assigned to a controlling area must all use the same operational chart of accounts.

The control indicator can be used to activate or deactivate certain controlling components and functions for a fiscal year.

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Assignment of Organizational Units

Figure 5: Assignment of Organizational Units

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Since mySAP ERP is a fully integrated system, you need to assign organizational units to each other across the different application components. You therefore need to define the internal and external organizational units concurrently and assign them to each other.

Having created the controlling area and the operating concern you then define their assignment. You can assign more than one controlling area to a given operating concern, enabling you to analyze these controlling areas together within the operating concern.

You can link company codes and controlling areas to each other in different ways in accordance with the way your enterprise is structured.

• If Financial Accounting and Controlling perspectives are identical, you can

assign one company code to one controlling area.

• If you assign more than one company code to a given controlling area, you

are then able to carry out controlling on a cross-company code basis. You assign a plant to a company code and therefore also to a controlling area, based on the valuation level. You can assign one plant, multiple plants, or no plant at all to a company code.

Changes to assignments are not a problem provided you have not created any

master data or transaction data.

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Figure 6: 1 : 1 Assignment

Lesson: Components of Management Accounting

Here you see a structure in which the financial and cost accounting views are identical and the controlling area is the same as the company code.

You can use the following three currencies in Management Accounting to perform evaluations in the information system:

Controlling area currency

If you are using a 1:1 assignment, (that is, if your controlling area and company codes are identical), the controlling area currency must be the same as the company code currency. The controlling area is then managed in the controlling area currency.

Object Currency

An object currency is defined for each account assignment object in

Management Accounting. When using a 1:1 assignment, an object currency that is different to the controlling area or company code currency can be defined for the account assignment object.

Transaction currency

The currency in which a document is posted to Management Accounting is the transaction currency.

You have to use the same chart of accounts in Management Accounting and in the assigned company code.

While the fiscal year variants of the company code and controlling area can contain different numbers of special periods, they must have the same number of posting periods. Furthermore, the period limits of the fiscal year variants must be

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Unit 1: Organizational Units TFIN20_1

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identical. You can use special periods in Financial Accounting to correct postings for year-end closing or to perform revaluations. If four special periods have been set up in Financial Accounting but only one in Management Accounting, the postings of the second, third and fourth special period in Financial Accounting are posted in the first period in Management Accounting. If no special periods exist in Management Accounting, Financial Accounting postings for the special period are posted in the last Management Accounting posting period.

Figure 7: 1:n Assignment

By assigning multiple company codes to a controlling area, you can perform

cross-company code cost accounting. You can allocate costs in Management

Accounting to more than one company code. If this is the case, you may need to carry out reconciliation postings, which you can do using the reconciliation ledger. There are three currencies available for your evaluations:

Controlling area currency

In cross-company-code cost accounting, the controlling area and company codes may possess different currencies. You can define a controlling area currency that is identical to one of the company code currencies. You can also use an additional currency in Management Accounting.

Company code currency

In cross-company code cost accounting, you are only free to choose an object currency if all the assigned company codes have the same currency and this is the same currency as the controlling area currency. If this is not the case, the object currency in the account assignment object will automatically be the company code currency.

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Transaction currency

Lesson: Components of Management Accounting

The currency in which a document is posted to Management Accounting is the transaction currency.

The operational chart of accounts is used in both Financial Accounting and cost and revenue accounting. As well as an operational chart of accounts, each company code can have a country-specific chart of accounts with alternative account numbers. This country-specific chart of accounts is structured according to the legal requirements of the country it refers to.

The fiscal year variants of a controlling area and company code can have different numbers of special periods. The number of posting periods must be the same.

1:1 or 1:n Assignment?

• When is a 1:n assignment advisable/necessary?

– If you require cross-company code reporting

– If you require cross-company code postings such as activity allocations

or assessments, for example

– Where logistical considerations make it necessary (production in an

associate plant)

– Where a calculated value is to be spread over more than one company

code

– If profit centers cover more than individual company codes

When should I create a controlling area for more than one company code?

Where the logistics of your company set up make it necessary to implement cross-company code processes (production in an associate plant). Where group costing is required. Where multi-level production cost management is required. Where you require cross-company code postings, for example, to allocate

activities, activate internal activities, or for assessments. Profit Center Accounting and transfer prices stop at controlling area level.

What restrictions do I need to take into account if I set up one controlling area only?

In addition to the restrictions mentioned on the slide for the chart of accounts, currency, and the fiscal year variant, you also need to note that you can only perform the closing in Management Accounting after the final closing has been performed in Financial Accounting. From an organizational point of view, there can be only one Management Accounting manager for the company codes that are combined. The volume of data for one controlling area can be very considerable, meaning that performance may suffer as a result. If you use one controlling area, only one operating concern is possible, meaning that characteristics and value fields must be sufficient for all company codes. Automatic reconciliation postings are possible for cross-company code allocations only minus tax. It follows that to be able to use the function, the company codes must belong to a taxable entity.

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Changes to the assignment should not be a problem provided you have not

created any master data or transaction data. In a productive system, combining company codes that were previously separate in a controlling area, or splitting a controlling area (1:n) into several new controlling areas necessitates conversion of data.

Figure 8: Organizational Structures in Controlling: IDES

For the IDES Group, we have created one operating concern, IDEA. The mySAP ERP system collects the group's global results, which can then be evaluated in the profitability analysis application component using various evaluation criteria. The internal accounting requirements of the IDES Group are met using different controlling areas. Both kinds of CO scenarios are used, that is, scenarios with cross-company code controlling areas as well as scenarios where the company code and the controlling area are the same.

Internal accounting for most of the Group's European companies is performed in

controlling area 1000. This enables the Group to use cross-company code cost

accounting for the companies assigned to this controlling area. This is possible because all the companies use the same chart of accounts and the same number of posting periods.

In the French subsidiary, however, a decision has been made to use the country-specific chart of accounts as the operational chart of accounts. For this reason, a separate controlling area is required for the French subsidiary.

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Exercise 1: Organizational Units

Exercise Objectives

After completing this exercise, you will be able to:

• Display the company codes which are assigned to controlling area 1000.

• Check which control parameters are currently active in the controlling area.

• Explain various settings in the controlling area.

Business Example

A new department has been set up in one of the IDES European subsidiaries. This department is responsible for advising and consulting companies in the installation and application of software.

Task 1:

Your consulting company is assigned to the controlling area 1000-CO Europe. A range of settings have already been made for this controlling area and you would like to check them.

1. Which assignment control (Controlling area: Company code 1:1 or 1:n ) has

been set in the basic data?

Continued on next page

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2. Use the F1 key to call up more detailed information on the fiscal year variant. Must the number of special periods in the company code and controlling area be identical?

3. Check whether the cost and profit center accounting and commitments

management components are active in controlling area 1000.

4. How many company codes are assigned to controlling area 1000?

Task 2:

Carry out the following task:

1. Another company would like to newly implement Management Accounting.

There is currently only one company code, meaning that the enterprise would be displayed using a 1:1 assignment. However, it can be seen that the enterprise will expand strongly, including abroad. Consequently, the company will have to integrate new company codes into the controlling

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area. Which assignment control and currency (type) settings should you use that will enable new company codes to be assigned to the controlling area at a later date?

Hint: In the following exercises, you will be working in

Customizing and in various applications. To facilitate your work, you have the option of opening several system windows (sessions), by choosing System → Create Session. You can switch between sessions at any time.

Hint: Optimize user-friendliness by adding the frequently used

menu paths to your favorites. (using drag and drop or transaction codes)

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Solution 1: Organizational Units

Task 1:

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Your consulting company is assigned to the controlling area 1000-CO Europe. A range of settings have already been made for this controlling area and you would like to check them.

1. Which assignment control (Controlling area: Company code 1:1 or 1:n ) has

been set in the basic data? a)

Hint: The following menu path abbreviations are used in this solution set:

Customizing Path (transaction SPRO):

SAP Reference IMG: Tools → Customizing → IMG → Execute

Project → SAP Reference IMG

Path for Cost Center Accounting Application:

CCA: SAP menu → Accounting → Controlling → Cost Center

Accounting

b) Menu path for task 1

IMG: Controlling → General Controlling → Organization → Maintain

Controlling Area

c) Solution to task 1-1

Select the controlling area 1000 and call up the detail screen using Goto Details. This controlling area allows cross-company code cost accounting.

2. Use the F1 key to call up more detailed information on the fiscal year variant. Must the number of special periods in the company code and controlling area be identical?

Answer: It is also possible to go from here to the expense reports. The

number of posting periods must be the same. The period limits in the fiscal year variants must also be identical.

3. Check whether the cost and profit center accounting and commitments

management components are active in controlling area 1000.

Answer: In controlling area 1000, switch to the activate components/control

indicators view. Cost Center Accounting, Profit Center Accounting and

commitment management components are active.

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4. How many company codes are assigned to controlling area 1000?

Answer: In controlling area 1000, switch to the Assign Company Code(s)

view. There are seven IDES company codes and several practice company codes (for special course use) assigned to controlling area 1000.

Task 2:

1. Another company would like to newly implement Management Accounting.

There is currently only one company code, meaning that the enterprise would be displayed using a 1:1 assignment. However, it can be seen that the enterprise will expand strongly, including abroad. Consequently, the company will have to integrate new company codes into the controlling area. Which assignment control and currency (type) settings should you use that will enable new company codes to be assigned to the controlling area at a later date?

Hint: In the following exercises, you will be working in

Customizing and in various applications. To facilitate your work, you have the option of opening several system windows (sessions), by choosing System → Create Session. You can switch between sessions at any time.

Hint: Optimize user-friendliness by adding the frequently used

menu paths to your favorites. (using drag and drop or transaction codes)

a) You must set the assignment control in the controlling area to

Cross-Company Code Cost Accounting, even though you initially want

to assign only one company code. The currency type setting determines what currency is used in the controlling area. You should choose currency type 20 (controlling area currency) or currency type 30 (group currency) so that other company codes that are added later can use their own local currency for their accounting operations.

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Lesson Summary

You should now be able to:

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Unit Summary

Unit Summary

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Unit Summary TFIN20_1

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Test Your Knowledge

Test Your Knowledge

1. The currency of the controlling area must always be the same as the currency

of the company code.

Determine whether this statement is true or false.

□ True □ False

2. In 1:n assignments, the operational charts of accounts in all assigned company codes and in the controlling area must be the same.

Determine whether this statement is true or false.

□ True □ False

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Test Your Knowledge

Answers

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1. The currency of the controlling area must always be the same as the currency

of the company code.

Answer: False

In cross-company code assignments, every company code can be processed in its own currency. You are free to select the controlling area currency.

2. In 1:n assignments, the operational charts of accounts in all assigned company codes and in the controlling area must be the same.

Answer: True

The charts of accounts must be the same.

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Unit Overview

Unit 2

Master Data

The standard hierarchy is presented as an organizational structure of the cost centers. The participants learn how to create cost centers and to distinguish between general ledgers and cost elements.

They create cost elements, activity types and statistical key figures and update them using individual and collective processing. We show how master data can be changed in a time-dependent way and added into other groups.

Unit Objectives

After completing this unit, you will be able to:

• Describe how to best structure the standard hierarchy

• Create cost centers

• Understand the meaning of the cost center category.

• Distinguish between G/L accounts and cost elements

• Create cost elements in Management Accounting, and explain alternative

methods for creating them

• Create activity types.

• Plan manual prices for the activity types on different cost centers • Create statistical key figures

• Update master data in collective processing

• Explain the time dependencies of master data

• Create master data groups and explain how they are created

Unit Contents

Lesson: Cost Centers ... 25 Exercise 2: Cost Centers ... 31 Lesson: Cost elements... 41

Exercise 3: Cost elements ... 45 Lesson: Activity Types ... 50

Exercise 4: Activity Types ... 53

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Unit 2: Master Data TFIN20_1

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Lesson: Statistical key figures... 61 Exercise 5: Statistical key figures ... 63 Lesson: Global Functions For Master Data ... 69

Exercise 6: Global Functions For Master Data ... 75

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Lesson: Cost Centers

Lesson Overview

Lesson: Cost Centers

Here you will familiarize yourself with the standard hierarchy as an organizational structure. You will create cost centers. The relationship between cost center - cost center category is explained.

Lesson Objectives

Business Example

The manager of the Controlling department outlines the cost center structure of the organization, together with the respective management areas. You are to represent this structure in the system as a standard hierarchy. You have to assign each cost center to this structure to portray your enterprise entirely.

Master Data and Transaction Data

Figure 9: Master Data and Transaction Data

In Overhead Cost Controlling, there is a distinction made between master data and transaction data.

Master data contains information that remains the same over a long period of

time.

Transaction data is short-lived and is assigned to master data.

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Cost elements describe the origin of costs. Cost elements are defined as primary

or secondary. Primary cost elements are elements used in production that are procured from outside the company. Secondary cost elements are elements used in production that are produced within the company itself.

Cost centers define areas of responsibility that incur and influence costs.

Activity types are production activities and services provided to the organization

by a cost center. They are used for allocating costs of internal activities to the areas that incurred the costs.

Statistical key figures, which are values that describe a cost center, are used as a

basis for allocations (for example, distribution, assessment) and for performing key figure analysis.

The Organizational Structure of the Standard Hierarchy

Figure 10: The Organizational Structure as a Standard Hierarchy

Before you can create cost centers, you must first define a standard hierarchy. Specify the name of the standard hierarcy when you create the controlling area. The standard hierarchy is a structure to which all cost centers within the

controlling area must be assigned. How you define your structure is generally up to you. We would, however, recommend you define the structure so that it reflects the internal areas of responsibility and the controlling and decision-making structures within your organization. These are usually the same as the internal functional areas depicted in your company's organization chart.

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Figure 11: Cost Centers and the Standard Hierarchy

The cost center is the location where the costs are incurred. Cost centers can be set up based on functional requirements, allocation criteria, activities or services provided, geographic location and/or areas of responsibility.

For the purposes of Overhead Cost Controlling, cost centers are grouped together in decision, control, and responsibility units. To map this structure, you create the cost center standard hierarchy.

Each level or node of the standard hierarchy is a cost center group. As of Release 4.6, you can assign cost centers and nodes to one hierarchy level. You can create or change cost centers either using the relevant menu entry or directly in the standard hierarchy maintenance function.

Cost centers that are created or changed from within the standard hierarchy have the status Inactive, that is, they are not handled as account assignment objects in Management Accounting. The assignments can only be checked and the cost center released once the cost center is active.

If you want to assign a cost center to another hierarchical level, you can do this in the standard hierarchy maintenance by a simple reassignment of the cost center. In other words, you do not need to make changes to your cost center master data.

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You can change the assignments of the organizational units, company code, business area, or profit center during the course of a fiscal year only if the following conditions hold:

• The currency of the new company code is the same as the currency of the old

company code.

• You have only posted planning data in the fiscal year.

• The cost center is not assigned to a fixed asset, work center, or HR master

record.

Cost center categories

Figure 12: Cost center categories

The cost center category is an indicator in the cost center master data, which specifies the category for the cost center. Examples include administration, production, or sales & distribution. You can use your own cost center categories, or use those supplied by SAP.

Cost center categories enable you to assign the same characteristics to similar cost centers. For example, you can allow particular activity types only for particular cost centers. This is useful to prevent production activites from being posted to administrative cost centers by mistake. You can also use the cost center category for cost calculation, where it controls what percentage of the overheads apply to that cost center category.

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TFIN20_1 Lesson: Cost Centers

In Customizing, you can define lock indicators for each cost center category, or specify that the managing of quantities on cost centers is allowed. When you assign a cost center to a particular category (you do this when creating the cost center), the corresponding lock indicators and allowed values for this category are proposed as default values for this cost center.

Figure 13: Exercise Tasks: Structuring the Example Enterprise

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TFIN20_1

Exercise 2: Cost Centers

Exercise Objectives

• Display the standard hierarchy.

• Create cost centers for the consulting department.

Business Example

The organizational structure of your consulting department is already mapped in the standard hierarchy of the controlling area. You now need to assign the six cost centers that you have reserved for the consulting department to the corresponding hierarchy nodes.

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Unit 2: Master Data

Task 1:

Figure 14: Standard hierarchy of the consulting department

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1. Display the standard hierarchy of your company and check that the nodes

correspond to those in the above graphic.

Task 2:

Create cost centers for the consulting department. The cost centers should be valid from the first day of the current fiscal year until the default valid to date. Assign all the cost centers to the German subsidiary (Company code 1000).

1. Create the cost centers Telephone, Organization, IT Services and FI/CO

Consulting directly in the standard hierarchy. Use the above graphic as

a guide. When you create the master data for each cost center, use the following information:

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Figure 15: Data for creating the cost center master data

2. Because you have created your cost centers within the standard hierarchy,

they have the status “Inactive”, that is, they are not yet recognized as an account assignment object and can be deleted from the system without problems. Activate your cost centers.

3. To keep data input to a minimum, create the cost center “Motor Pool”

by copying the cost center “IT Services” and use the cost center “ FI/CO Consulting” to create the cost center “LO Consulting” . Even though you can do this directly in the standard hierarchy, try using the menu entries in the application menu.

Remember to change the name of the cost center and the person responsible each time.

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4. Display one of the cost centers. Which currency does the cost center use?

Where does this entry in cost center master data originate from?

5. Display the control indicator for the cost center you have called up. Where does this information come from? Can this information be changed in the master data?

6. Because all your cost centers are located in controlling area 1000 and use

the object currency EUR, you don’t want to see this information on the overview screen in the standard hierarchy.

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TFIN20_1

Solution 2: Cost Centers

Task 1:

Figure 17: Standard hierarchy of the consulting department

1. Display the standard hierarchy of your company and check that the nodes

correspond to those in the above graphic.

Answer: Cost Center Accounting: Master Data → Standard Hierarchy

→ Display

The organizational structure of the consulting department appears under node H-AC405. Expand the individual nodes under your group SERV## and then expand B##.

Task 2:

Create cost centers for the consulting department. The cost centers should be valid from the first day of the current fiscal year until the default valid to date. Assign all the cost centers to the German subsidiary (Company code 1000).

1. Create the cost centers Telephone, Organization, IT Services and FI/CO

Consulting directly in the standard hierarchy. Use the above graphic as

a guide. When you create the master data for each cost center, use the following information:

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TFIN20_1

a) Cost Center Accounting: Master Data → Standard Hierarchy →

Change

b) Place your cursor on the hierarchy area B10## to which the cost center is to be assigned and choose Edit → Create Cost Center

Field Name or Data Class

Cost Center Valid from To

Description Owner

Cost center category

Values

101##

01.01. Current fiscal year 31.12.9999

Telephone Hoffmann 9

Choose "Organization" to enter the data on the organizational units.

Company Code Business Area Profit Center

Save your data!

Values

1000 IS## 1402

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Repeat the procedure to create the rest of the cost centers. Bear in mind that they may be assigned to different areas of the hierarchy.

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2. Because you have created your cost centers within the standard hierarchy,

they have the status “Inactive”, that is, they are not yet recognized as an account assignment object and can be deleted from the system without problems. Activate your cost centers.

a) Cost Center Accounting: Mater Data → Standard Hierarchy →

Change → Edit → Activate

b) Highlight all newly created cost centers and activate these online by choosing Activate.

3. To keep data input to a minimum, create the cost center “Motor Pool”

by copying the cost center “IT Services” and use the cost center “ FI/CO Consulting” to create the cost center “LO Consulting” . Even though you can do this directly in the standard hierarchy, try using the menu entries in the application menu.

Remember to change the name of the cost center and the person responsible each time.

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a) Cost Center Accounting: Master Data → Cost Center → Individual

Processing → Create

b)

Cost Center Valid from To Template Controlling Area Values 203##

202## 1000

On the basic data screen, change the name of the cost center and that of the manager (person responsible)

Description

Employee responsible

Save your data!

Values

Motor pool Rose

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Proceed as for cost center 302##. Use cost center 301## as a template.

4. Display one of the cost centers. Which currency does the cost center use?

Where does this entry in cost center master data originate from?

Answer: Cost Center Accounting: Master Data → Cost Center →

Individual Processing → Display

Enter a cost center you created. In this case, the object currency is taken from the company code. The local currency in company code 1000 is EUR.

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5. Display the control indicator for the cost center you have called up. Where does this information come from? Can this information be changed in the master data?

Answer: Click the Control tab page. Control indicators are default values

that are taken from the cost center category and which can be changed in the master data.

6. Because all your cost centers are located in controlling area 1000 and use

the object currency EUR, you don’t want to see this information on the overview screen in the standard hierarchy.

Answer: Cost Center Accounting: Master Data → Standard Hierarchy →

Change, then choose the Column Configuration icon

Deselect the indicator for the company code and the object currency.

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Lesson Summary

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TFIN20_1

Lesson: Cost elements

Lesson Overview

Lesson: Cost elements

You will familiarize yourself with the relationship between general ledgers in Financial Accounting and in Management Accounting.

You will learn how to create cost elements manually and automatically.

Lesson Objectives

Business Example

You receive a message from Financial Accounting informing you that the

company codes are set up. You can now start creating corresponding cost elements in Management Accounting.

The Chart of Accounts

Figure 20: The Chart of Accounts

The chart of accounts contains all the general ledger (G/L) accounts belonging to Financial Accounting.

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From the cost controlling viewpoint, a circular system exists because the expense and revenue accounts in Financial Accounting correspond to primary cost and revenue elements in Management Accounting, and because postings in Financial Accounting are passed on in real-time to Cost and Revenue Element Accounting. In addition, it is only in Management Accounting that you can create secondary

cost elements. These are used to record internal value flows like activity

allocations, assessments and settlements.

The Cost Element

Figure 21: The Cost Element

Due to the integrated nature of the mySAP ERP system you need to create expense accounts in Financial Accounting with corresponding primary costs elements in Controlling. This ensures that expenses in Financial Accounting and primary costs in Management Accounting can be reconciled. You must create the primary cost elements in Financial Accounting as G/L accounts before you can create them in Management Accounting.

To be able to post to a primary cost element, you require an object in

Management Accounting (such as a cost center) to identify the origin of the costs. Examples of primary cost elements are material costs and salary costs.

Secondary costs elements are used exclusively in Management Accounting to

identify internal cost flows such as assessments or settlements. They do not have corresponding general ledger accounts in Financial Accounting and are defined in Management Accounting only.

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TFIN20_1 Lesson: Cost elements

When you analyze revenues in cost controlling, the mySAP ERP system records them as revenue elements. Revenue elements are primary cost elements. When you create a cost element, you must assign a cost element category. This assignment determines the transactions for which you can use the cost element. For example, category 01 (general primary cost elements) is used for the standard primary postings from Financial Accounting or Materials Management.

Figure 22: Automatic Creation of Cost Elements

You can create cost elements automatically. You provide the default settings through which the cost element or the cost element range that you want to create is given and enter the cost element types for the cost elements.

Primary costs are only created when the respective general ledger exists in the

operational chart. The SAP system takes the cost element name from the G/L account master data in Financial Accounting. However, you can change the name in Management Accounting.

As of Release 4.6, when processing the operational chart directory in Financial Accounting Customizing, you can customize whether creating a general ledger automatically generates a cost element. If you use this function, you must take into account the account number within the framework of the pre-settings for the automatic creation of cost elements.

Secondary cost elements are generated for all cost elements you have defined.

The description is taken from the cost element category.

Once you have entered your default settings, a background session starts that generates the cost elements.

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Figure 23: Business scenario

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The overview above displays the enterprise organization from your exercise activities. Here the portrayal of the method used for crediting cost centers seems to be too early. However, it is useful to provide a preview at this stage. To make an assessment or to allocate activity directly, you need secondary cost elements. As you can see above, some of the cost centers in the exercise scenario will use assessment to make credits, or will allocate activity directly.

This overview shows you why (!) you create which secondary cost elements in the exercise.

You can take this overhead slide from the folder and use it as a helpful overview thoughout the course.

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TFIN20_1

Exercise 3: Cost elements

Exercise Objectives

• Create secondary cost elements in Management Accounting.

Business Example

At the end of the period, you would like to assess costs from the “Organization”, “IT Services”, and “Motor Pool” cost centers to the Consulting cost centers. Furthermore, the Consulting cost centers use the direct activity allocation functions to allocate their consulting services to internal orders. These internal orders have been set up to act as cost objects for the individual companies that used the services. To use the assessment and direct activity allocation functions, you need to define secondary cost elements. In addition, you want to distribute production cost centers to the repair costs according to their origin. This should be carried out later by means of the indirect activity allocation.

Task 1:

Create your secondary cost elements. They should be valid from the first day of the current fiscal year through the default Valid to date.

1. Create the assessment cost elements. Use the following information:

Cost element

Name Desc. Cost el-

ement cate- gory 6300## Assessment org. 6310## Assessment IT Service ## Organizational Group ## IT Services Group ## 42 42

6311## Assess Motor Pool ## Motor Pool Group ## 42

2. Create the cost elements you need to allocate consulting activities. Use the following information:

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Cost El- ement

ement cate- gory

6261## Junior consulting ## Junior consulting group ## 43

6262## Senior Consultant ## Senior Consultant Group ## 43

6393## IAA repair (internal

activity allocation repair)

Task 2:

Repair Costs Group## 43

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1. Using the online help, define primary and secondary cost elements. What are

the prerequisites for creating primary cost elements or revenue elements?

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TFIN20_1

Solution 3: Cost elements

Task 1:

Create your secondary cost elements. They should be valid from the first day of the current fiscal year through the default Valid to date.

1. Create the assessment cost elements. Use the following information:

Cost element

ement cate- gory 6300## Assessment org. 6310## Assessment IT Service ## Organizational Group ## IT Services Group ## 42 42

6311## Assess Motor Pool ## Motor Pool Group ## 42

a) Cost Center Accounting: Master Data → Cost Element → Individual

Processing → Create Secondary

b)

Cost Element Valid from To

Name Desc.

Cost element category

Save your data!

Values

6300##

Assessment org.

Organizational Group ## 42

Repeat this procedure to create the other cost elements.

2. Create the cost elements you need to allocate consulting activities. Use the following information:

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Cost El- ement

ement cate- gory

6261## Junior consulting ## Junior consulting group ## 43

6262## Senior Consultant ## Senior Consultant Group ## 43

6393## IAA repair (internal

activity allocation repair)

a)

Cost Element Valid from To

Name

Repair Costs Group##

Values

6261##

Junior consulting ##

43

Desc.

Cost element category

Save your data!

Junior consulting group ## 43

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Proceed as for cost element 6262## and 6393## (reference 6261##).

Task 2:

1. Using the online help, define primary and secondary cost elements. What are

the prerequisites for creating primary cost elements or revenue elements?

Answer: A cost element classifies an organization's valuated consumption

of production factors within a controlling area. A cost element corresponds to a cost-relevant item in the chart of accounts.

A distinction is made between primary cost elements, which arise through the use of externally procured goods, and secondary cost elements, which represent values flows within Management Accounting.

Primary cost elements must be defined as G/L accounts before they can be created within a controlling area.

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TFIN20_1

Lesson Summary

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Lesson: Activity Types

Lesson Overview

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50

You will familiarize yourself with the master data of the activity type and learn how to create a price for the activity to be performed.

Lesson Objectives

• Create activity types.

• Plan manual prices for the activity types on different cost centers

Business Example

The consultants that work for your company need to be able to settle the services that they provide to customers directly to a cost object (internal order). You want to allocate the services of junior and senior consultants separately.

The Activity Types

Figure 24: The Activity Types

The activity type classifies the activities that are to be performed within a

company by one or several cost centers.

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TFIN20_1 Lesson: Activity Types

If a cost center provides activities for other cost centers, orders, processes, and so on, then this means that the resources of this cost center are being used. The costs of these resources need to be allocated to the receivers of the activity. Activity types serve as tracing factors for this cost allocation.

In an internal activity allocation, the quantity of the activity, such as the

number of consulting hours, is entered into the mySAP ERP system (manually or automatically). The system calculates the associated cost based on the activity

price and generates a debit to the receiver and a credit to the sender for both the

quantity and costs. The internal activity allocation is carried out using secondary

cost elements, which are stored as default types in the activity type master data.

You can restrict the use of the activity type to certain types of cost centers by entering the allowed cost center categories in the activity type master record. You can enter up to eight allowed cost center categories, or leave the assignments "unrestricted" by entering an asterisk (*).

The activity type category is used to determine whether and how an activity type is recorded and allocated. For example, you can allow some activities to be allocated directly, but specify for others that they are either not allocated, or allocated indirectly only.

Relationship Between Cost Center/Activity Type

Figure 25: Cost center/activity type

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To enable internal activity allocation, you need to specify which cost centers provide which activity types at what price. You do this in the mySAP ERP system by planning the activity output/prices for a cost center. To enable this, the SAP system provides a wide range of options.

For direct activity allocation, you enter the quantity of the activity to be allocated manually. In order for a cost allocation and an activity allocation to be performed, the mySAP ERP system has to valuate the allocated activity amount using the sender's price for this activity type. For a direct activity allocation, the plan price for the combination “cost center/activity type” is used for this calculation. You can enter the planned price either manually, or have it calculated by the system automatically within planning. To manually set the price, the plan price indicator (PPI) must be (manually) set to 3. You can use this procedure if your price calculation is not complex, for example where the prices required for your rates are determined within your organization and do not depend on internally produced activities, or where the rate depends on the prices of external suppliers and not on the costs of the cost center. Automatic calculation of plan prices is covered in course AC412.