Management Accounting in SAP S/4 Hana Controlling

CO is used for managing and recording of costs and providing information to the management for internal assessment and performance.

· Cost Element Accounting:

Revenue and expenditure GL accounts are called as cost elements.

Two Types of cost element are used in CO:

a) Primary Cost Element:

It is used to carry the cost from FI to CO module.

b) Secondary Cost Element:

It is used to carry the cost within CO module from one cost object to another.

· Cost Center Accounting:

It is used to redistribute the cost between the departments. We collect the department wise cost and redistribute it to other departments using allocation methods and finally allocate the cost to products based on how much resources of each department product is using.

Planning and actual cost can be posted to the cost centers, and we can do variance analysis. In new version of SAP S4 HANA we can also assign the control to restrict the actual cost up to plan values.

Cost center accounting is used for the calculation of activity price calculation. How much is the price of each activity. Activity price is then used to calculate the direct cost of manufacturing the products.

· Product Costing

Product costing is used to calculate the price of products in detail with their cost components like cost of material, labor, and overheads separately.

Three different types of product cost are going to be calculated:

· Standard Cost.

It is estimated cost to produce one single unit.

· Plan Cost.

It is estimated cost for the whole production order.

· Actual Cost.

It is actual cost consumed to product goods in a production order.

Profitability Analysis (COPA):

It is used to analysis the profitability using different dimensions like region, product, customer etc.

Internal Order:

It is used to analyze the cost at the lower level like how much is the cost for one project.

Profit Center Accounting:

It is used for both revenue and cost analysis like we want to analyze the profit for one material.

Material Ledger Actual Cost:

It is used to actualize the standard cost of materials. It is mandatory for S4 Hana.

IAS-2 valuate the materials at the lower cost and NRV.

Controlling Area:

It is for internal reporting purpose which records and analyze overhead related activities like:

i) Cost Element Accounting

ii) Cost Center Accounting

iii) Internal Orders

Manufacturing related activities like:

i) Product Costing.

Evaluation of internal unit analysis and evaluation like:

i. Profit Center Accounting.

Assignment of company code to controlling area:

Multiple company codes can be assigned to one controlling area but below conditions should be met:

a. Chart of account for company code and controlling area should be the same.

b. Fiscal year variant should be the same. (Start and end of fiscal year & no of posting periods).

Controlling Area Components:

Fiscal Year:

It is used to validate the historical data as well. We need to specify the fiscal year from which we need to analyze the historical data.

CO Number Ranges:

Like FI document types in CO, we maintain different number ranges for different transaction types of CO but unlike FI document type number ranges CO number ranges are year independent.