BUS 301 Chapter 5 Study Guide

Primary Cost Element

Entering a cost object as part of the journal entry to and expense account G/L. The "vehicle" that links postings in FI G/L expense accounts to cost elements. Used in controlling to to identify the type of cost that was incurred in financial accounting and how it will be assigned or received, by a cost object in controlling.

Profit Center

A CO master data element responsible for capturing the revenue generation and associated costs incurred in the generation of revenue and cost containment. Used for the evaluation of profit or return on investment for internally defined organizations.

Cost Objects

A bucket that captures expenses and allows a manager to compare the plan to actual expenses as they are posted.

Assessments

Assessments provide a method for periodically allocating BOTH primary and secondary cost elements. Costs are removed from one cost center and placed to another cost center. They do not retain their original cost element definition since the detailed composition of the cost is not important to the receiver - its just bundled with other costs. Each segment of an assessment is assigned to a secondary cost element, allowing costs to be grouped together and transferred to receiving cost centers through the use of that secondary cost element.

FI always requires a dual entry for every transaction. At least one debit and one credit.

Controlling does not require a dual entry. When moving values into CO from FI, only a single sided entry is created.

Sub modules of CO include

Cost element accounting Overhead cost accounting Product cost accounting Profit center accounting Profitability analysis

Internal orders

Defined for a specific purpose that has a specific life span.

Allocation Technique

Distributions Assessments Periodic allocations allow the company to allocate or share costs collected for a cost center or group of cost centers, called senders. The allocations are then allocated to responsible parties, called receivers, according to business specifications. The type of periodic allocation determines whether (1) the identity of the cost remains the same in the receiver as it was in the sender, or (2) whether the identity of the cost remains the same in the receiver as it was in the sender.

Secondary Cost Elements

Exist exclusively in CO. Used to move costs between different cost objects (internally to CO only). Secondary cost elements allows us to change the identity of a cost as we move it between different cost objects.

Operating Concern

Highest organizational structure in SAP controlling. The operating concern supports the SAP profitability analysis function in CO. Using SAP profitability analysis, a business can be divided into different external views of the company, called segments, from which profitability can be calculated and analyzed. These segments can be based on product, market, or other customer focused points of view.

Temporary cost objects include:

Internal orders Production orders Maintenance orders Projects

Company Code can only be assigned to one controlling area.

Many company codes can be assigned to the same controlling area. For more than one company code to be assigned to the same controlling area, all company codes must be assigned to the same operating chart of accounts and have the same fiscal year.

Primary Revenue Elements

One to one linkage between general ledger revenue accounts and CO revenue elements. These primary revenue elements are established to permit the transfer of FI revenue information to CO. The primary revenue element can post to cost centers.

Controlling (CO)

Performs the managerial accounting functions in an enterprise. Designed to collect the transactional data that provides a foundation for preparing internal reports that support decision making within the enterprise.

Cost Center

Piece of master data representing a clearly delimited area of responsibility where costs occur. The ability to plan costs, capture actual costs, monitor costs, and analyze the variances provides an explanation for some of the other uses of cost centers.

Distribution

Provide a method for periodically allocating primary cost elements. This credits the sender for the entire amount that is being distributed and debits the receiver the amount of money that is the receiver's share of the cost. Using distribution means that the identity of cost element in the sending and receiving cost centers are the same. Usually done at the end of the month.

Controlling Area

Self-contained organizational element for which the management, oversite, reporting, and analysis for revenues and costs can be performed. The controlling area provides the structure to identify and track where revenues and costs are incurred for reporting purposes. Only for CO and is not considered in the operation of FI reporting.

Once done with an internal order, the costs must be settled

Settlement ensures that the internal order balance will be zero. After it is settled, the internal order is complete and can be closed.

Internal Order

Similar to cost center, but it is a temporary object with specific start and end dates. Has the responsibility for recording expenses and revenues in the associated time frame. Temporary area of responsibility for which we need to capture costs and revenues.

Maintenance orders

Temporary cost objects that allow for planning and the capture of actual costs for maintenance activities such as fixing machinery.

Projects

Temporary cost objects that allow for planning and tracking of actual costs for a large project.

Production orders

Temporary cost objects used to capture the planning and actual costs associated with manufacturing activities.

Activity Types

The productive output of a cost center. More specifically they are how we measure of monetize activities. Once we have created an activity type, a relationship between an activity type and a cost center is created, and that relationship is given a monetary value.

Secondary Cost elements are used only in controlling

These secondary cost elements allow us to distinguish direct expenses from expenses that have been charged to the cost element through periodic allocations from other cost elements within CO. Secondary cost elements allow for the bundling and aggregation of expenses.

Statistical Key Figures

Used to support those internal allocations associated with settlement, assessment, and distribution. Statistical key figures provide the foundation for accurate and effective cost allocations between various cost objects. Essentially mathematics formulas based on different ways an expense can be allocated.