EXP_0012.doc

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SAP AG

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Overview Of Controlling: Unit Contents

General Tasks of Controlling

The Components of CO

Integration

(C) SAP AG TACO40 12-1

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Overview Of Controlling: Unit Objectives

Explain the differences between Internal and External Accounting.

Explain how CO helps manage a business and use some standard CO reports .

List the components of CO and explain their purpose.

Explain the basic integration points between the components of CO.

Explain the basic integration points between CO and other R/3 modules.

At the conclusion of this UNIT, you will be able to:


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Overview Of Controlling: Business Scenario

Your initial focus is to gain an understanding of the purpose of CO, and how FI and CO work together to provide both financial and management information.

You learn that CO has several different major components, each having a particular purpose. You also learn that these different components are integrated with each other, as well as with other R/3 components.

In order to get some exposure to the output of CO, you volunteer to assist in running and analyzing some reports for the German subsidiary of your company. These reports focus on operating results for the CO Europe controlling area. They illustrate integration between the General Ledger (FI),), Cost Center Accounting (CO), and Profitability Analysis (CO) components.


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General Tasks of Controlling

Explain the differences between Internal and External Accounting within the R/3 System.

Explain some of the ways in which Controlling can help to manage a business.

Use some standard CO reports to perform a typical business analysis.

At the conclusion of this TOPIC, you will be able to:


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CO

FI

Internal AccountingCost Accounting

Managerial AccountingManagementAccounting

DifferentValuationsFlexibility

Taxaudit

External AccountingFinancialStatementsLegalRequirements

Standards

Controlling

FI and CO: Standards Versus Flexibility

All businesses have requirements to provide accounting information for users both external and internal to the organization. External parties requiring accounting information would include regulatory agencies, banks, and insurance companies. Accounting information of this type would typically be prepared according to standards issued by a governing regulatory agency. This helps to ensure that operating results are accounted for and reported so that the information is comparable from one enterprise to the next.

There are also many varied information requirements for users inside the organization, including all levels of management, marketing, finance & accounting, sales, manufacturing, etc. Accounting information of this type is frequently prepared in a format unique to the organization's requirements rather than according to any standard.


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Introduction to the Controlling MethodCost allocation according to source of costs

Typi

cal C

ontr

ollin

g Ac

tiviti

es

OverheadOverhead CostCostControllingControlling

Cost ObjectCost ObjectControllingControlling

ProfitabilityProfitabilityAnalysisAnalysis

Preliminary CostingSimultaneousCostingFinal Cost.Calculation ofActual Costsof Goods Manufactured

Sales PlanningDrill- down-Reporting

Overhead CostPlanningActivity pricecalculationActivity allocation- fixed- variable

DistributionAssessment


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The Components of CO

List the components of CO.

Explain the basic purpose of each of these components.



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The Components of Controlling

Cost and Revenue Element Accounting

Overhead Cost Controlling: Cost Center Accounting

Overhead Order Accounting

Activity-Based Costing

Product Cost Controlling: Product Cost Planning

Cost Object Controlling

Actual Costing/ Material Ledger

Profitability Analysis

Profit Center Accounting

The various CO components can be classified into different groups. The classification indicates the general purpose of a given component.

Management of an enterprise requires the use of different tools for different situations. If you want to analyze profit, for example, then you need a tool appropriate to the view you wish to take (e.g.: by product or by responsibility center). The Profitability Accounting component group has two tools (components) that are available for addressing this business need.

Similarly, the Overhead Cost Controlling and Product Cost Controlling component groups offer tools appropriate to other types of business requirements.


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Cost and Revenue Element Accounting(CO-CEL):

Cost and revenue element accounting provides the functionalityto define cost and revenue elements, which are used to plan and to post costs and revenuesof the reconciliation ledger, which can be used to reconcile CO with FI.About these functionality you will see more in later units.


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Cost & Revenue Element AccountingOverhead Cost ControllingOverhead Cost Controlling

Product CostControllingProduct CostControlling

Cost Center Acc.

OverheadOrder Acc.

Cost Object

CO

Profitabilitysegments

ActivityBased

Costing

ProfitabilityAnalysisProfitabilityAnalysis

ProfitCenterAccounting

ProfitCenterAccounting

ProfitCenter Acc.

PrCtrPrCtr 11

PrCtrPrCtr 33

PrCtr 2

PrCtrPrCtr 44

PrCtrPrCtr 55

Cost & RevenueElement

Accounting

Answersthe question:

Which costswere incurred?

Cost and Revenue Element Accounting (CO-OM-CEL) is part of the Overhead Management component group. It provides the structure for assignment of CO data through the classification of transaction line items according to the nature of the cost or revenue being posted to a given controlling object (e.g. cost center, internal order, etc.).

The cost flows in CO can lead to the need for reconciliation between internal and external accounting in certain cases. Cost and Revenue Element Accounting is the CO component providing functionality that supports this possible requirement.


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Cost Center AccountingH1H1IDES EuropeIDES Europe

H1010H1010Corporate

1110ExecutiveBoard

H1000H1000GermanyGermany

H2000H2000UKUK

H2300H2300EspanaEspana

H2100H2100PortugalPortugal

H1110H1110Executive Board

H1120H1120CorporateServices

1230Power

1220Motor Pool

1000Corporate Services

1210Telephone

1200Canteen

H1200H1200Finance &Administration

2100Finance &Admin.

H1210H1210Admin.

H1220H1220HumanResources2200HumanResources

H1230H1230Purchasing

2300Purchasing

H1300H1300Sales &Marketing

H1400H1400TechicalDepartment

The Cost Center Accounting component (CO-OM-CCA) tracks where costs occur in your organization. The cost center is an organizational unit in a controlling area. Cost centers can be defined according to several different design approaches. A typical approach could be for an enterprise to define a cost center for each low-level organizational unit that has responsibility for managing costs. As costs are incurred, they are assigned or posted to the appropriate cost center. These costs could include payroll costs, rent and utility costs, or any other costs assignable to a given cost center.

The posting and assignment of costs to cost centers not only makes managerial accounting possible; but is a vital step for utilizing the other Controlling components. As noted above, cost centers can be set up according to different design approaches, including: functional requirements, allocation criteria, activities or services provided, geographic location and/or area of responsibility. But whichever approach is selected, it should be consistent throughout the enterprise.

Cost centers can be grouped together to provide summary cost information. In fact, a fundamental requirement for implementing Cost Center Accounting is the creation of a standard hierarchy for a controlling area. This reflects the overall structure of all cost centers in that controlling area, and provides pre-defined summary costs at each node of the structure. This will be described in greater detail in the next Unit.


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Internal Orders

Internal Orders

Accrual orders

Cost Accounting FunctionsCost Accounting Functions

Orders with revenues

Overhead orders

Investment orders

An Internal Order is an extremely flexible CO tool that can be used for a wide variety of purposes to track costs and, in some cases revenues, within a controlling area. Internal orders provide capabilities for planning, monitoring, and allocation of costs.

Internal orders may be used for a variety of purposes, and can be grouped into four general categories: Overhead orders: Used to monitor overhead costs incurred for a particular purpose, such as

conducting a trade fair, or tracking costs for maintenance and repair work. Investment orders: Used to monitor costs incurred in the production of a fixed asset, such as

building a storage facility. Accrual orders: Used to offset postings of accrued costs (costs calculated in CO) to cost centers. Orders with revenue: Used to replace the cost accounting parts of SD customer orders if SD is

not being used, so that both costs and revenues can be tracked; or to monitor revenues not affecting the organization's core business (such as miscellaneous revenues).


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COCO--OMOM--ABCABC

ABCABCProducts Product FamiliesCustomersDistribution Channels...

Processes ProcessesProcesses

SAP'sComprehensive Approach to ABC

SAP's comprehensive approach to Activity Based Costing includes the following CO components: CO-OM-ABC, CO-PC, and CO-PA.

In CO-OM-ABC, you can define the processes that pull overhead resources from different parts in the organization. By using the appropriate drivers, the corresponding process quantities and costs are charged to products by using the CO-PC component, or directly to the profitability segments defined in the CO-PA component.


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Model of Activity-Based Costing in R/3

Processes

Identify business processesthat consume significantoverhead resources

Assign costs to processesthrough resource drivers

Identify non-value-addedactivities

Provide realistic productcosts including processconsumption by product

Cost Centers(Resources)

Products,Customers,Channels, etc.

Processes

Financial AccountingFinancial Accounting

CostDriver

ResourceDriver


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Product Cost Controlling (CO-PC):

Product Cost Planning (PCP)

Cost Object Controlling (OBJ)

Actual Costing / Material Ledger (ACT)

Product Cost Controlling is concerned with all aspects of planning the cost of producing products or services, as well as tracking and analyzing the actual costs that are incurred in the production process. Product Cost Controlling consists of the following components:Product Cost Planning is used for preliminary costing and can answer the following questions: What will the production of a certain product or service cost? Is external procurement less expensive than on site production? Which production method will perform with the lowest costs? Which are the costs of production, if we assume an optimal situation? This can be the base with

which we can compare other production situations.Cost Object Controlling focuses on simultaneous costing and the period end closing. Simultaneous costing will give you the information to do a comparison between the planned costs

and the actual cost of a certain production phase. Period end closing will calculate the value of goods still in the production process (work in

process), will calculate the variances between the cost estimate and the actual costs and will settle them to other modules like CO-PA, EC-PCA and FI.

Actual Costing / Material Ledger is used to provide actual costs for each material at the end of the period. Materials and their movements are valued with a standard price during the period. Any variances with respect to this standard are collected in the material ledger when invoices are received or orders settled. During period closing these variances are used to calculate an actual price for the material in the closed period. Postings can be made in FI to take account of this price.


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Product Cost Controlling - Overview

BOM RoutingRouting$

Quantity StructurePP Master Data

$

$

$

$ $

$$$

Value Structure

Prices- for materials- for activity types- for processesOverhead

Cost Estimate:Standard costs

Product Cost PlanningCost Object Controlling

Planned costs,actual costs

Simultaneous Costing

OrderInternalMaterialExternalOverheadTotal

$$$$$

Work in processScrapVariances

Settlement

Final CostingPeriod Close

Quantity StructureMaterial movements

Value Structure

Material settlement:Actual costs

Actual Costing

ProcessProcess

Material movements

MaterialMaterialledgerledger

Product Cost Planning is used to plan product costs. The cost estimate uses a quantity structure, which can either be derived from the logistics components of the R/3 system or entered manually. You determine in Customizing which values are to be used to value this structure to create the cost estimate. The result may be transferred to the material master as a standard price.

Cost Object Controlling is used to track the costs posted to cost objects. There are a number of different types of cost objects available to use, depending on your controlling requirements. These include sales orders, production orders, process orders, and production cost collectors. Cost object controlling is used to calculate work in process, scrap costs, and variances at period close.

Actual Costing is used to calculate actual product costs at period close. The result may be transferred to the material master as a weighted average price for the closed period. In Release 4.5 the quantity structure will be derived dynamically using the materials movements in the R/3 system. The values connected with these movements are collected in the Material Ledger. Single-level settlement functions to calculate the actual material costs at period close are available in Release 4.0A. Multi-level settlement functions will be available in Release 4.5.

Our focus will now be Cost Object Controlling, and the different CO and PP scenarios that are supported by the cost object controlling component. We will review a variety of different cost objects that are available from the CO-PC environment. Our objective is to realize that regardless of the logistic scenario, there is no difference from the point of view of controlling.


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Cost Object ControllingGoods Issues

Nonstock10 pc

Material 1100 pc

Delivery

Settlement

WarehouseWarehouse

Cost object

Plan costs Actual costs

COCO

Externalactivities

Invoices

INVOICE

Cost center 4712Activity FEP 15 minConfirmations/ activity alloc.

There are several different types of cost objects that can be used in Cost Object Controlling. These include production orders, production cost collectors, cost object hierarchies, etc. You must choose a cost object that is appropriate to your production scenario. The different types of cost objects will be discussed in greater detail in the next Unit.

When the cost object is created, a preliminary cost estimate may be carried out (depends on cost object and customizing) to calculate the planned costs for the cost object.

Actual costs are incurred when materials from stock or activity types of cost centers are consumed. Primary costs can be posted directly from legacy modules to the production order. This means you can call up the data of simultaneous costing at any time.

When you deliver the produced goods to stock, the cost object is credited with the value of the delivered quantity and the goods are capitalized on the stock. Depending on the price control, this may result in revaluation of the product stock.

After finishing the production process or at the end of the period the production order will be settled to stock or price difference account.

In dependency on scenario and cost object, a billing could take place incurring revenues to the cost object.

After finishing the production process or at the end of the period the cost object will be settled. Additional period-end closing activities may be performed such as

calculation of overhead results analysis (WIP calculation) calculation of variances


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Actual Costing

Quantity Structure Value Structure

Material settlementMaterial settlement

ProcessProcess

Material movements

MaterialMaterialledgerledger

Calculates actual costsCreates closing entries

Actual Costing uses the Material Ledger to store material prices in up to three currencies and according to three valuation strategies (group, legal and profit center).

Actual Costing aims to provide the actual costs for each material at period close. Each material movement is recorded in the Material Ledger together with the preliminary valuation and any variance (from invoice or order settlement). Material settlement is used to integrate this variance in the material price at period close.

In Release 4.0A single-level material settlement is available. In Release 4.5 multi-level settlement will be used to reconstruct the quantity structure based on the material movements for the period and assign variances for the raw materials to the finished and semi-finished products as follow-up costs.

The actual price for each material can be updated to the material master for the closed period.


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Profitability Accounting:

Profitability Analysis (CO-PA)

Profit Center Accounting (EC-PCA)


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Profitability Analysis - An External View

Company Market

Billing DocumentSD

Profitability AnalysisCO-PA

Key Sales Figures:Revenues, Cost of Sales...

Market Segments:Customer, Product,Product Group, Distribution Channel

COCO--PAPA

SDSD

The goal of CO-PA is to determine the profitability of market segments:

Profitability Analysis (CO-PA) enables you to analyze profits and contribution margins for market segments of your company. The objective of CO-PA is to support sales, product management, and corporate-wide planning and decision-making, using an external view from a market-oriented perspective.

The market segments are defined in terms of characteristics such as products, product groups, customers, customer groups, geographic areas, etc. For example, you may wish to analyze profitability for a specific group of products that you sell to a particular customer (or group of customers). When setting up CO-PA for use in your company, you will have broad flexibility to choose whichever characteristics are relevant for defining your company's market segments. Each unique combination of characteristic values (e.g. sales of product A to customer Y) defines a profitability segment.

You must also decide which specific values related to profitability should be analyzed for those segments. These values are known as key figures. For example, you can define which types of revenue and expense/cost categories should be used to determine a value for gross margin according to your company's requirements. Here again, CO-PA gives you the ability to freely select whichever values are relevant to the various users in your company. If different types of users define gross margin differently (e.g. sales management vs. product management), it is possible to provide separate gross margin figures for each, calculated according to their individual requirements.

CO-PA provides a multidimensional reporting tool that can be used to design reports that analyze data for any selected market segments, and any defined measures of profitability.


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c u s t o m e r

r e g io n

s a le sd iv is io n

p r o d u c t

M a r k e tM a r k e t

C o m p a n yC o m p a n y

W h ic h a r e th e la r g e s t a n d f a s te s t g r o w in g

c u s to m e r s ?

H o w h a v e s a le s a n d c o n t r ib u t io n m a r g in s

c h a n g e d in th e la s t p e r io d f o r e a c h p r o d u c t?

W h a t a r e m y w o r s t a n d b e s t p e r f o rm in g

s a le s o r g a n iz a t io n s in d i f f e r e n t r e g io n s ?

B i l l in gd o c u m e n t s

T y p ic a l Q u e s t io n s in P r o f i t a b i l i t y A n a ly s is

The best way to illustrate the purpose of Profitability Accounting in the R/3 system is to think about some of the typical questions which can be answered.


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Profit Center Accounting - An Internal ViewThe goal of EC-PCA is to measure the profitability of areas of responsibility within the organization.

SAP AG

CompanyCompany

Util

ity C

osts

Util

ity C

osts

Direct Labor

Direct Labor PrCtr 1PrCtr 1

PrCtr 3PrCtr 3

PrCtr 2

PrCtr 4PrCtr 4

PrCtr 5PrCtr 5

goods/servicesgoods/services

ECEC--PCAPCA

Billing DocumentSD

MMMCompany

MMMCompany

Reven ue

Revenue

A profit center is a management-oriented organizational unit used for internal controlling purposes. Dividing your company up into profit centers allows you to analyze areas of responsibility and to delegate responsibility to decentralized units, thus treating them as "companies within the company". EC-PCA lets you set up your profit centers according to product (product lines, divisions), geographical factors (regions, offices or production sites) or function (production, sales).

Profit Center Accounting (PCA) allows you to calculate internal measurements of profitability. This internal view of profitability, then, reflects the success of a given profit center at meeting the profitability goal for which it was given responsibility.

The Information System provides a tool for evaluating plan and actual data. Numerous standard reports are provided, and you can create your own custom reports as well. Reports can be executed for Profit Centers or Profit Center groups. Profit Center Accounting can report on selected balance sheet items, such as Assets, AR/AP, Material Inventory, and Work in Process. This permits the calculation of certain financial key ratios such as ROI (Return on Investment). Other reporting capabilities include detailed information on the source objects (e.g. cost centers, internal orders) that contributed costs posted to profit centers.


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Analysis with Profit Centers

Area 2Area 1 Cost Center

Line Line itemsitems

Profit Profit Center 2Center 2

Profit CenterProfit Center

Overhead Orders

Cost CenterGroup

Profit Profit CenterCenterProfitProfit

Center 1Center 1

Individual Controlling Objects

The sales and complete value added of an area are set against the costs of this period in the profit center so that profit becomes visible. Evaluations are possible on the profit center level, profit center sub-divisional area level, and through a breakdown of profit center data from the source Controlling objects allocated to the profit center. In this way, cost structures can be traced back to their origins and evaluated.


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Distinguishing Features of CO-PA and EC-PCAProfitability Analysis

CO-PA

MarketProfitability

Aims ofProfitabilityAccounting

Methods

Objects to beanalyzed

ComparisonProfit Center Accounting

EC-PCA

Cost-of-SalesAccounting

ProfitabilitySegments

EnterpriseControlling

Cost Of Sales & Period

Accounting

ProfitCenters

Reporting Multi-dimensional Reporting

List-orientedreporting


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Integration



Run a simple inquiry in the system on an FI document and any associated CO document(s).



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Integration Within CO - Value Flows (1)Overhead Cost

Controlling

ProfitCenter

PrCtrPrCtr 11

PrCtrPrCtr 33

PrCtr 2

PrCtrPrCtr 44

PrCtrPrCtr 55

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Cost Center Acc.

Activity Based

CostingOverhead Order Acc.

Profit CenterAccounting

There can be numerous interrelationships between the various CO components. Value flows can occur for many different purposes.

Within the Overhead Cost Controlling area, costs can be posted to cost centers and internal orders from other R/3 modules (external costs). Cost centers can then allocate costs to other cost centers, to orders, and to processes in Activity Based Costing (ABC). ABC, in turn, can pass costs to cost centers and orders. Internal orders can settle costs to cost centers and to processes in ABC (as well as to other orders).


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Integration Within CO - Value Flows (2)Overhead CostOverhead Cost

ControllingControlling

Product CostProduct CostControllingControlling

ProfitCenter

PrCtrPrCtr 11

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Cost Center Acc.

Activity Based

Costing

Cost Object

CO

Overhead Order Acc.

Profit CenterProfit CenterAccountingAccounting



There are also key cost flows that can occur between the Overhead Management and Product Cost Controlling components. Cost objects (such as production orders, etc.) can receive direct cost postings from FI (such as when an invoice receipt is assigned to the cost object); costs from cost centers (as production activities are performed, or from overhead allocation); costs settled from internal orders; and costs allocated from processes in ABC.


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Integration Within CO - Value Flows (3)Overhead CostOverhead Cost

ControllingControlling

Product CostProduct CostControllingControlling

ProfitCenter

PrCtrPrCtr 11

PrCtrPrCtr 33

PrCtr 2

PrCtrPrCtr 44

PrCtrPrCtr 55ProfitabilityProfitabilityAnalysisAnalysis

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Cost Center Acc.

Activity Based

Costing

Cost Object

CO

Overhead Order Acc.

Profit CenterProfit CenterAccountingAccounting



There are also key cost flows that can occur between the Overhead Management and Product Cost Controlling components. Cost objects (such as production orders, etc.) can receive direct cost postings from FI (such as when an invoice receipt is assigned to the cost object); costs from cost centers (as production activities are performed, or from overhead allocation); costs settled from internal orders; and costs allocated from processes in ABC.

Profitability Accounting components also are tightly integrated with Overhead Management and Product Cost Controlling. Profit Center Accounting, by virtue of its basic design, receives statistical cost postings from virtually all other CO components.

In addition to direct postings from FI, Profitability Analysis can receive cost assessments from cost centers and ABC processes, settlements of cost from internal orders, and production variances settled from cost objects.


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Integration With Other Modules (1)Overhead Cost ControllingOverhead Cost Controlling


Cost Center Acc.

Overhead Order

Accounting

Cost Object

CO


ActivityBased

Costing


FI AA

FI

FI

ProfitCenterAcc.

ProfitCenterAcc.

ProfitCenter

PrCtrPrCtr 11

PrCtrPrCtr 33

PrCtr 2

PrCtrPrCtr 44

PrCtrPrCtr 55

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Other R/3 modules generate data that has a direct impact on CO. For example, when non-stock consumable items are purchased, an expense is posted to the GL. At the same time, the expense is posted as a cost to the cost center (or other object in CO) for which the items have been purchased. That cost center's costs may later be passed on as overhead to a production cost center, or elsewhere in CO.

The Financial Accounting application area of R/3 is a primary source of data for Controlling. Typically, most expense postings to the General Ledger would result in a cost posting to CO. These expense postings to the G/L could be manual journal entries, or initiated through accounts payable postings, or through depreciation postings from Asset Accounting (FI-AA).

Revenue postings could also be created by a journal entry to the G/L, and would also typically generate postings in CO to CO-PA and Profit Center Accounting.

Both expense and revenue postings from FI must specify one (or more) object in CO that will receive the cost or revenue data.

There are also several situations that will cause CO to create postings in FI. These would include reconciliation postings initiated by the reconciliation ledger in CO, inventory postings caused by the delivery of finished goods from production, and settlement of capital costs from the creation of fixed assets.


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Cost Center Acc.

Overhead Order

Accounting

Cost Object

CO


ActivityBased

Costing


HR

HR

ProfitCenterAcc.

ProfitCenterAcc.

ProfitCenter

PrCtrPrCtr 11

PrCtrPrCtr 33

PrCtr 2

PrCtrPrCtr 44

PrCtrPrCtr 55

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The Human Resources (HR) modules can generate several types of cost postings to Controlling. The HR system allows you to allocate the cost of work to different Controlling (CO) objects. In addition, planned personnel costs can be transferred to CO as input to CO planning.


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Cost Center Acc.

Overhead Order

Accounting

Cost Object

CO


ActivityBased

Costing


MM

MM

ProfitCenterAcc.

ProfitCenterAcc.

ProfitCenter

PrCtrPrCtr 11

PrCtrPrCtr 33

PrCtr 2

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The Logistics area of R/3 also has numerous integration points with Controlling. In the inventory area of Materials Management, a goods issue transaction can create a cost posting in CO to whichever object is specified (e.g. cost center, production order, internal order). Looking from the other direction, CO can cause a posting to inventory (in MM) resulting from the delivery of finished goods from production. In addition, product cost estimates created in CO can update price fields in material master records. Finally, the creation of purchase orders in MM can generate commitment postings within CO.


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Cost Center Acc.

Overhead Order

Accounting

Cost Object

CO


ActivityBased

Costing


PP

SD

SD

SD

PP

PP

ProfitCenterAcc.

ProfitCenterAcc.

ProfitCenter

PrCtrPrCtr 11

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PrCtr 2

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The Production Planning (PP) area of Logistics also works very closely with Controlling. Bills of Materials and routings, which are created in PP, can be utilized in Product Cost Accounting in CO. In addition, PP production orders are one form of cost object utilized to track and control production costs in Cost Object Controlling.

Sales and Distribution (SD) is a primary source of revenue postings to CO via billing documents. An SD sales order can also be used in conjunction with the make-to-order production scenario in CO, in order to track costs and revenues and evaluate the profitability of the arrangement.


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Integration With Other Modules - SummaryOverhead Cost ControllingOverhead Cost Controlling


Cost Center Acc.

Overhead Order

Accounting

Cost Object

CO


ActivityBased

Costing


FI AA

FI MM PP

HR

HR

FI SD

SD

SD

MM

PP

PP

ProfitCenterAcc.

ProfitCenterAcc.

ProfitCenter

PrCtrPrCtr 11

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PrCtr 2

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ing

Other R/3 modules generate data that has a direct impact on CO. For example, when non-stock consumable items are purchased, an expense is posted to the GL. At the same time, the expense is posted as a cost to the cost center (or other object in CO) for which the items have been purchased. That cost center's costs may later be passed on as overhead to a production cost center, or elsewhere in CO.

The Financial Accounting application area of R/3 is a primary source of data for Controlling. Typically, most expense postings to the General Ledger would result in a cost posting to CO. These expense postings to the G/L could be manual journal entries, or initiated through accounts payable postings, or through depreciation postings from Asset Accounting (FI-AA).Revenue postings could also be created by a journal entry to the G/L, and would also typically generate postings in CO to CO-PA and Profit Center Accounting.

The Human Resources (HR) modules can generate several types of cost postings to Controlling. The HR system allows you to allocate the cost of work to different Controlling (CO) objects. In addition, planned personnel costs can be transferred to CO as input to CO planning.

The Logistics area of R/3 also has numerous integration points with Controlling e.g. when doing a goods issue to a controlling object or a goods receipt from production.

The Production Planning (PP) and the Sales and Distribution (SD) area of Logistics also work very closely with Controlling. Consumption of activities, cost of goods issues, overhead surcharges, process allocations and direct primary costs can be posted to the cost object (e.g. PP-production order, sales order item) and by doing the period closing data like WIP, variances and price differences are settled to CO-PA, CO-PCA and FI. The billing document can incur revenues directly to CO-PA or to the sales order, if the sales order item is a cost object.


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SAP AG

R

Overview Of Controlling: Unit Summary

Explain the differences between Internal and External Accounting.

Explain how CO helps manage a business and use some standard CO reports .

List the components of CO and explain their purpose.



Having completed this UNIT, you should now be able to:


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