Controlling

SAP Controlling (CO) is another important SAP module offered to an organization. It supports
coordination, monitoring, and optimization of all the processes in an organization. The main
purpose of SAP controlling module is planning. objective of controlling is to manage the costs
and revenue in the organization. Controlling (CO) and Financial Accounting (FI) are
independent components in the SAP system. The data flow between the above two components
takes place on a regular basis.

SAP CO includes managing and configuring master data that covers cost and profit centres,
internal orders, and other cost elements and functional areas.

Components of SAP CO :-
The SAP CO module is compromised of many sub-components, such as:

 Cost Element Accounting − Cost and Revenue Element Accounting provides you with an
overview of the costs and revenues that occur in an organization. Most of the values are moved
automatically from Financial Accounting to Controlling. Cost and Revenue Element Accounting
only calculates costs which either do not have another expense or only one expense in Financial
Accounting.
 Cost Center Accounting − Cost Centre Accounting is used for controlling purposes within your
organization (Track Cost & Expenses).
 Profit Center Accounting − It is used to evaluate profit or loss of individual, independent areas
within an organization. These areas are responsible for their costs and revenues. (Track Cost &
Revenue).
 Internal Orders − Internal orders in SAP CO are used to collect and control according to the
job that incurred them. You can assign budgets for these jobs that is system monitored to ensure
that they are not exceeded from the set budgets.(Track Cost for Short Period)
 Product Cost Controlling − It calculates the cost for manufacture a product, or to provide a
service. It allows you to calculate the price at which you can profitably marketed it. (Plan Cost
of the Products).
 Activity-Based-Accounting− It is used to analyse cross-departmental business processes.
 Profitability Analysis − It is used to analyse the profit or loss of an organization by individual
market segments. Profitability Analysis provides a basis for decision-making. For example, it is
used to determine price, conditioning, customer, distribution channel, and market segment.
(Reporting Tools)

Step to Configuration Controlling area :-

1. Maintain Controlling area.(OKKP)

Menu Path :- SPRO => IMG => Controlling => General controlling => Organization
=> Maintain controlling area.

2. Maintain Number Ranges for Controlling Documents.(KANK)

Menu Path :- SPRO => IMG => Controlling => General controlling => Organization =>
Maintain Number Ranges for Controlling Documents.

3. Maintain Version(OKEQ)
CO versions in SAP are used to support planned activity and actual activity. You must maintain versions
in SAP for planned & actual activity. When you create controlling area in SAP, version 0 is automatically
generated in SAP. SAP system allows you to maintain number of versions as per your requirements and
all versions are controlling area dependent.

Menu Path :- SPRO => IMG => Controlling => General controlling => Organization =>
Maintain Versions.

4. Define Ledger for CO Version

In this activity, you assign G/L ledgers to controlling (CO) versions. This means that controlling will then read
the actual data (postings) from the G/L ledgers you specify here.

Menu Path :- SPRO => IMG => Controlling => General controlling => Organization =>
Define Ledger for CO Version

Cost Element Accounting

Cost Element Accounting is cost carrier which carries the cost from SAP FI to SAP
CO. It Provides with an overview of the costs and revenues that occur in an
organization.

Types of Cost Element:-

1. Primary Cost Element - It carries the cost from FI to CO.
 01 Primary Cost Element : It is used for expenses GL Accounts other than sales
Deduction.
 12 Sales Deduction : This cost come from Sales and Distribution.
 22 External Settlement : It is used to transfer internal order cost from CO to FI.
 11 Revenue : It is used for Sales/Revenue GL Accounts.

2. Secondary Cost Element - It carries the cost from CO to CO. It used for internal allocation
activities. no relation to GL accounts in SAP FI.
 21 Internal Settlement : It is used to Settle services order to cost object (Cost center,
Internal Order, Production order.
 31 WIP/RA : It is used in Product costing.
 41 Indirect Overhead : It is used in Indirect Overhead
 42 Assessment CE : Transfer cost from one cost center to another cost center.
 43 Activity CE(Direct OH) : It is used to transfer cost center cost to product cost.

Cost Element Categories: -

 Cost element categories classify primary and secondary cost element categories
determines whether you can post to a cost element directly or indirectly.

 Direct posting-you can post an amount to an account by specifying GL account number

and amount auto post directly to all primary cost element.

 Indirect posting- Posting only possible for secondary cost element.

Cost Element Categories

Primary Secondary

21-Internal Settlement
Cost Element Revenue Element 31-WIP CE
41-Internal Overhead
43-Internal Activity
42- Assessment Cost element

01- Primary CE 11- Revenue

12- Sales Deduction
22- External Sattlement

 In SAP S/4HANA Finance, both primary and secondary cost elements are now created as
G/L Accounts and are part of the chart of accounts

Creation of Cost Element :-

 Manual Creation :- SAP Menu => Accounting => Controlling => Cost Element Accounting =>
Master Data => Cost Element => Individual processing

TCode :- Creation - FS00

 Profit Center Accounting
Profit Center Accounting is used to determine profit for internal areas of responsibility. It lets
you determine profits and losses using either period accounting or the cost-of-sales approach .
Profit centers can be set-up to identify product lines, divisions, geographical regions, offices,
production sites or by functions. Profit centers are used for internal control purposes enabling
management the ability to review areas of responsibility within their organization.
 The profit center is stored in the cost center this way the costs flow to the profit center.
 Profit center is an organizational unit in controlling to recognize both revenues and
expenses
 It reflects a management-oriented structure of the enterprise for the purposes of
internal control
 It provides insight into the effectiveness and results for areas of responsibility within the
enterprise
The profit center is also stored in the material master. This way all sales orders created for the
finished product automatically picks up the profit center from the material master and all the
revenues and costs coming from sales order for that finished product is passed on to this profit
center.

HO

Branch-1 Branch-2

Store-1 Store-1
Store-2 Store-2
Store-3 Store-3

Profit Center Accounting - Configuration

1. Set Controlling Area (T-Code: OKKS)

Menu path: Display IMG -> Controlling -> Profit Center Accounting -> Basic Settings ->
Set Controlling Area
2. Maintain Version (T-Code: OKEQ)
Menu Path: SPRO => IMG => Controlling => General controlling => Organization =>
Maintain Versions.
 3. Maintain Controlling Area Settings for Profit Center (T-Code: 0KE5)
Menu path: Display IMG -> Controlling -> Profit Center Accounting -> Basic Settings ->
Controlling Area Settings -> Maintain Controlling Area Settings

4. Create Dummy Profit center (Required) (T-Code: KE51)

Menu path: Display IMG -> Controlling -> Profit Center Accounting -> Master Data -
>Profit Center -> Create Dummy Profit Center
Dummy profit center: The dummy profit center is the default profit center for entire
controlling area. All SAP cost objects are routed through the dummy profit center. There can
be only one dummy profit center per controlling area.
5. Set Control Parameters for Actual Data (T-Code: IKEF)
Menu path: Display IMG -> Controlling -> Profit Center Accounting -> Basic Settings ->
Controlling Area Settings -> Activate Direct Postings -> Set Control Parameters for Actual Data

6. Create Profit center master data (T-Code: KE51)

Menu path: SAP Easy Access -> Controlling -> Profit Center Accounting ->Master Data ->

Profit Center -> Individual Processing -> Create

7. Maintain the Profit center standard hierarchy (T-Code: KCH5N)

Menu path: SAP Easy Access -> Controlling -> Profit Center Accounting ->Master Data ->

Standard Hierarchy -> Change

Standard Hierarchy: The standard hierarchy can play major role in SAP controlling area.
Once you have created profit centers that should be assigned to standard hierarchy. Once you
assigned profit center to standard hierarchy, the name cannot be changed.

8. Assign Profit Center in Cost Center (T-Code: KS02)

9. Maintain number ranges for local document (T-Code: GB02)

10. Default Profit Center to G/L Accounts

 Cost Center Accounting
Cost center is the area of responsibility where costs are incurred. Cost center represents one of
the small units of responsibility within an organization structure.
In cost center accounting, operational expenses are captured by three separate master data
objects such as cost centres, activity types and statistical key figures.
Cost centres are maintained within a hierarchy, which is a representative of the implementing
company’s internal reporting / accountability structure. The hierarchy development is central to
all cost accounting reporting within the controlling module. Cost Center are like Department or
Division of an organization.

Cost Center
Hierarchy

Adminstrator Finance IT Sales HR

(1000) (2000) (3000) (4000) (5000)

Facilities
Central Finance Development Marketing HR Service
Management
(2001) (3001) (4001) (5001)
(1001)

Canteen General Finance Maintainance Advertisement HR Legal

(1002) (2002) (3002) (4002) (5002)

Step to Configuration Controlling area :-

1. Define Slandered Hierarchy :- It is the tree structure representing all cost center
belonging to a controlling area from a controlling.
TCode :- OKEON/OKENN
SPROControllingCost Center AccountingMaster DataCost CenterDefine
Slandered Hierarchy
2. Cost Center Categories :- It is defined to specify the nature of the cost center. It is useful
in activity planning of a cost center.
TCode :- OKA2
SPROControllingCost Center AccountingMaster DataCost CenterDefine Cost
Center Categories
3. Cost Center :- Cost Center are like Department or Division of an organization.
TCode :- KS01/KS02/KS03
SPROControllingCost Center AccountingMaster DataCost CenterCreate Cost
Center
 4. Cost Center Group :- It is use for reporting, planning and allocating cost at a more
aggregated Level. There must be one group that contains all the cost center.
TCode :- KAH1/KAH2/KAH3
SPROControllingCost Center AccountingMaster DataCost CenterDefine Cost
Center Groups

Document Posting with Cost Center Complete Process

1. Create GL - FS00
2. Create Cost Element - FS00
3. Create Cost Center - KS01
4. Post Document - FB50
5. Reporting