Sap Erp Financials

Shivesh Sharma
Optimize Your SAP ERP Financials

®
Controlling Implementation
Bonn � Boston
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Contents at a Glance
PART I Foundation
1 SAP ERP Implementation . ........................................................ 25
2 Controlling: An Introduction . ................................................... 49
3 Choosing the Optimal Controlling Enterprise Structure .............. 61
PART II Basic Controlling Processes

4 Controlling Business View . ....................................................... 79
5 ptimizing Cost Element Accounting, Cost Center
O
Accounting, Profit Center Accounting, and Internal
Order Accounting ...................................................................... 119
PART III Budgeting

6 ptimizing Capital Budgeting Using Investment
O
Management ............................................................................. 191
7 sing Funds Management to Optimize Public Sector
U
Budgeting . ............................................................................... 223
PART IV Product Costing

8 ptimizing Product Costing Decisions using Product
O
Cost Controlling ........................................................................ 301
PART V Reporting
9 ptimizing Profitability Reporting Using Profitability
O
Analysis (CO-PA) ....................................................................... 367
10 Reporting in Financials and Controlling . .................................... 403
11 Concluding Remarks .................................................................. 445
Appendices
A Glossary and SAP Abbreviations ........................................................... 449
B Bibliography.......................................................................................... 453
C The Author............................................................................................ 455
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Contents
Acknowledgments ........................................................................................ 15
Preface .......................................................................................................... 17
PART I Foundation
1 SAP ERP Implementation ........................................................... 25
1.1 Reasons for Implementing SAP ERP .............................................. 25

1.2 The SAP ERP Solution Stack ........................................................... 26
1.3 Types of SAP Implementations ....................................................... 29
1.4 SAP Implementation Methodologies ............................................. 32
1.4.1 Evolution from ASAP to ValueSAP to Solution Manager ....... 32
1.4.2 ASAP Methodology ............................................................. 33
1.4.3 ValueSAP Methodology ....................................................... 35
1.4.4 Solution Manager ............................................................... 35
1.5 SAP Best Practices Solution Set ...................................................... 40
1.5.1 Building Blocks .................................................................... 42
1.5.2 Best Practices Installation Assistant ...................................... 42
1.5.3 eCATT Procedures ................................................................ 43
1.5.4 Business Configuration Set ................................................... 44
1.6 The Role of SAP ERP Financials and Controlling Consultants in
SAP ERP Implementations ............................................................. 44
1.6.1 Management Reporting Perspective .................................... 45
1.6.2 Integration Perspective ........................................................ 46
1.6.3 Accounting and Audit Perspective ....................................... 46
1.7 Summary ....................................................................................... 47
2 Controlling: An Introduction ..................................................... 49
2.1 Key Requirements for the SAP ERP Financials Solution ................... 49
2.2 SAP ERP Financials Direction: A Historical Perspective ................... 52
2.3 SAP ERP Financials: A Snapshot View ............................................ 54
2.3.1 SAP ERP Financials Solution Stack: The Big Picture .............. 54
2.3.2 SAP Easy Access for SAP ERP Financials/Controlling
Components ........................................................................ 56
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Contents
2.4 SAP ERP Controlling Roadmap ....................................................... 58

2.5 Summary ....................................................................................... 60
3 Choosing the Optimal Controlling Enterprise Structure ............ 61
3.1 Controlling Organizational Entities ................................................ 62

3.1.1 Operating Concern .............................................................. 62
3.1.2 Controlling Area .................................................................. 64
3.1.3 Cost Center ......................................................................... 64
3.1.4 Profit Center ........................................................................ 65
3.2 Assignment of Organizational Entities ........................................... 66
3.2.1 Company Code to Controlling Area (N:1 or 1:1) .................. 66
3.2.2 Controlling Area to Operating Concern (N:1 or 1:1) ............. 68
3.2.3 Inheritance Principal ............................................................ 69
3.2.4 Standard Hierarchy Versus Alternative Hierarchy .................. 70
3.2.5 Time Dependency of Enterprise Organizations ..................... 71
3.3 Key Controlling Mapping Decisions and Best Practices .................. 71
3.3.1 One Operating Concern Versus Multiple Operating
Concerns by Region ............................................................. 71
3.3.2 Currencies in Controlling ..................................................... 72
3.3.3 One Controlling Area Versus Multiple Controlling Areas
by Region ............................................................................ 73
3.3.4 Cost Centers Standard Hierarchy Definition:
By Department or By Division ............................................ 74
3.3.5 Profit Center Hierarchy Definition ........................................ 74
3.4 Summary ....................................................................................... 75
PART II Basic Controlling Processes
4 Controlling Business View ......................................................... 79
4.1 Layers of Controlling Reporting ...................................................... 80

4.2 Basic Configuration Settings ........................................................... 82
4.2.1 Maintain Controlling Areas .................................................. 82
4.2.2 Maintain Number Ranges for Controlling Documents .......... 85
4.2.3 Maintain versions ................................................................ 86
4.3 Basic Concepts in Controlling ........................................................ 87
4.3.1 Account Assignment of Controlling Objects ......................... 87
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Contents
4.3.2 Commitments Management in Controlling .......................... 89

4.3.3 Settlement in Controlling ..................................................... 90
4.4 Procurement Process: Purchase Requisition to Check Writing ........ 90
4.4.1 Commitment Management Flow in Procurement ................. 92
4.4.2 Actuals Flow in Procurement ............................................... 92
4.5 Production Planning and Manufacturing Process Integration .......... 93
4.6 Managing Projects and Capital Budgeting Integration .................... 93
4.6.1 Integration of Cost Planning with Project Systems ............... 94
4.6.2 Cost Settlement in Project Systems ...................................... 96
4.7 Plant Maintenance Integration ....................................................... 97
4.7.1 Integration of Plant Maintenance Master Data
to Controlling ...................................................................... 97
4.7.2 Integrating Plant Maintenance Orders with Controlling ....... 98
4.8 Sales Order to Cash Application Process Integration ...................... 101
4.9 Human Capital Management Integration ....................................... 103
4.9.1 Master Data in Human Resources and Linkage
to Controlling ..................................................................... 104
4.9.2 Personnel Cost Planning in Human Resources .................... 104
4.9.3 Position Budgeting and Control ......................................... 106
4.10 Controlling and Finance Integration .............................................. 107
4.10.1 Reconciliation Ledger ...................................................... 108
4.10.2 Real-time Integration of Controlling with Financial
Accounting ...................................................................... 110
4.10.3 Transfer Controlling Documents Retrospectively ............... 115
4.10.4 Default Account Assignments for Controlling .................... 116
4.11 Summary ...................................................................................... 118
5 Optimizing Cost Element Accounting, Cost Center Accounting,

Profit Center Accounting, and Internal Order Accounting ........ 119
5.1 Cost Element Accounting .............................................................. 120

5.1.1 Types of Cost Elements ....................................................... 121
5.1.2 Cost Element Group ........................................................... 123
5.2 Cost Center Accounting ............................................................... 125
5.2.1 Cost Center Accounting Master Data .................................. 126
5.2.2 Cost Center Planning .......................................................... 136
5.2.3 Resource Planning .............................................................. 139
5.2.4 Cost Center Budget Planning .............................................. 145
5.2.5 Commitment and Funds Commitment ............................... 147
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Contents
5.2.6 Overhead Costing Sheets .................................................... 153

5.2.7 Allocations ......................................................................... 156
5.2.8 Year-End Closing ................................................................ 157
5.3 Profit Center Accounting ............................................................... 158
5.3.1 Profit Center Master Data ................................................... 160
5.3.2 Profit Center Master Data Assignment Monitor
and Assignments ................................................................ 163
5.3.3 Number Ranges and Document Types ................................ 164
5.3.4 Choose Additional Balance Sheets and P&L Accounts ......... 166
5.3.5 Period-End Closing ............................................................. 168
5.4 Internal Order Accounting ............................................................ 169
5.4.1 Internal Order Master Data ................................................ 170
5.4.2 Create Order Type .............................................................. 175
5.4.3 Status Management ............................................................ 179
5.4.4 Internal Order Settlement Process ...................................... 182
5.4.5 Budgeting and Availability Control in Internal Order
Accounting ......................................................................... 184
5.5 Summary ...................................................................................... 187
PART III Budgeting
6 Optimizing Capital Budgeting Using Investment Management 191
6.1 Investment Management .............................................................. 192

6.1.1 Investment Program: An Introduction ................................. 194
6.1.2 Investment Program: Master Data ...................................... 195
6.1.3 Investment Program: Budgeting .......................................... 206
6.1.4 Appropriation Requests ...................................................... 208
6.1.5 Appropriation Request Types .............................................. 209
6.1.6 Investment Measures: Integration with Asset Accounting .... 213
6.1.7 Orders Versus Projects as Investment Measures .................. 213
6.1.8 Investment Profile .............................................................. 214
6.1.9 Assign Investment Profile to Model Order .......................... 216
6.2 Investment Management Year End Closing ................................... 217
6.2.1 Open a New Approval Year for the Investment Program ...... 218
6.2.2 Commitments and Budget Carryforward of Investment
Measures ............................................................................ 219
6.2.3 Carryforward Budget of Old Investment Program ................ 220
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Contents
6.2.4 Close Old Approval Year ..................................................... 221

6.3 Summary ...................................................................................... 222
7 Using Funds Management to Optimize Public Sector

Budgeting ................................................................................. 223
7.1 Funds Management: An Introduction ........................................... 224

7.2 Basic Settings ................................................................................ 227
7.2.1 Activate Account Assignment Elements .............................. 227
7.2.2 Allow BLANK as the Value for Account Assignment
Elements ............................................................................ 228
7.2.3 Activate Functions .............................................................. 229
7.2.4 Define a Funds Management Area and Its Global
Parameters ........................................................................ 232
7.2.5 Assign Fiscal Year Variant to Funds Management Area ...... 234
7.2.6 Enterprise Structure with Reference to Funds
Management ...................................................................... 234
7.3 Master Data .................................................................................. 235
7.3.1 Activate Year-Dependent Master Data ............................... 235
7.3.2 Commitment Items ............................................................. 236
7.3.3 Funds Center ...................................................................... 241
7.3.4 Fund .................................................................................. 246
7.3.5 Funded Program ................................................................. 250
7.3.6 Functional Area .................................................................. 253
7.3.7 Subdivision ID .................................................................... 254
7.3.8 Budget Structure in Budget Control System (BCS) ............... 256
7.3.9 Account Assignment Derivation ......................................... 259
7.3.10 Status Management ............................................................ 260
7.4 Budgeting .................................................................................... 261
7.4.1 Activate the Account Assignment in the Budget
Control System .................................................................. 263
7.4.2 Define Budget Category ...................................................... 264
7.4.3 Budget Types ...................................................................... 265
7.4.4 Budget Entry Documents .................................................... 267
7.5 Availability Control ....................................................................... 274
7.5.1 Activate/Deactivate Availability Control for Applications .... 275
7.5.2 Activity Groups ................................................................... 277
7.5.3 Tolerance Profiles ............................................................... 278
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Contents
7.5.4 Availability Control Ledger ................................................. 280

7.5.5 Define Activation of Availability Control ............................ 286
7.6 Integration/Actual and Commitment Update ................................ 287
7.6.1 Assign Update Profile to Funds Management Area ............ 289
7.6.2 Override Update Profile ..................................................... 290
7.6.3 Make Other Settings ......................................................... 291
7.6.4 Number Ranges for Actual Data Documents ....................... 293
7.6.5 Activate/Deactivate Funds Management ............................. 294
7.7 Closing Operations ....................................................................... 295
7.8 Summary ...................................................................................... 297
PART IV Product Costing
8 Optimizing Product Costing Decisions using Product Cost

Controlling ................................................................................. 301
8.1 Product Cost Controlling: An Introduction .................................... 301

8.2 Product Cost Planning .................................................................. 303
8.2.1 Integration ......................................................................... 304
8.2.2 Production Cost Planning Components and Costing
Sequence ........................................................................... 305
8.2.3 Cost Component Structure ................................................. 307
8.2.4 Costing Variant ................................................................... 311
8.2.5 Price Update ...................................................................... 317
8.3 Cost Object Controlling ............................................................... 321
8.3.1 Integration ......................................................................... 323
8.3.2 Product Cost by Period: An Introduction ............................ 324
8.3.3 Product Cost by Period and Product Cost Collector ............. 325
8.3.4 Product Cost by Period: Preliminary Costing Estimate ......... 326
8.3.5 Product Cost by Period: Simultaneous Costing .................... 331
8.3.6 Period-End Closing (Work in Process) ................................. 332
8.3.7 Period-End Closing ............................................................ 342
8.4 Actual Costing/Material Ledger (CO-PC-ACT) ............................... 347
8.4.1 Integration ......................................................................... 348
8.4.2 Learning Path ..................................................................... 349
8.4.3 Basic Settings ..................................................................... 350
8.4.4 Material Update ................................................................. 356
8.4.5 Actual Costing .................................................................... 359
8.5 Summary ...................................................................................... 363
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Contents
PART V Reporting
9 Optimizing Profitability Reporting Using

Profitability Analysis (CO-PA) .................................................... 367
9.1 Profitability Analysis: An Introduction ........................................... 368

9.1.1 Types of Profitability Analysis .............................................. 368
9.1.2 Major Differences Between Costing-Based and
Account-Based CO-PA ........................................................ 368
9.2 Operating Concern ....................................................................... 372
9.2.1 Defining the Operating Concern ......................................... 372
9.2.2 Maintaining Value Fields .................................................... 379
9.2.3 Maintaining Profitability Segment Characteristics ................ 381
9.3 Master Data .................................................................................. 382
9.3.1 Characteristic Values ........................................................... 382
9.3.2 Define Characteristic Hierarchy ........................................... 383
9.4 Flow of Actual Values: Integration of SD, MM, and Financial
Accounting, with CO-PA ............................................................... 385
9.4.1 Initial Steps: Setting up Number Ranges, Characteristic
Groups and Value Field Groups .......................................... 385
9.4.2 Transfer of Incoming Sales Orders/Billing Documents .......... 392
9.4.3 Order and Project Settlement ............................................. 395
9.4.4 Direct Postings from FI/MM ............................................... 398
9.4.5 Settlement of Production Variances .................................... 398
9.5 Summary ...................................................................................... 401
10 Reporting in Financials and Controlling .................................... 403
10.1 Reporting in SAP ERP Financials and Controlling ........................... 404

10.2 SAP ERP Financials Reports ........................................................... 407
10.2.1 Financial Accounting Reporting ........................................ 407
10.2.2 Controlling Component (CO) Reporting ............................ 417
10.3 Variants and Variables in Reporting ............................................... 432
10.3.1 Variants ............................................................................ 432
10.3.2 Variables in Reporting ....................................................... 435
10.4 Drilldown Reporting in SAP ERP Financials ................................... 436
10.5 Summary ...................................................................................... 443
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Contents
11 Concluding Remarks .................................................................. 445
Appendices ...................................................................................... 447
A Glossary and SAP Abbreviations ............................................................. 449

B Bibliography ............................................................................................ 453
C The Author .............................................................................................. 455
Index ............................................................................................................. 457
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This introduction to the various tools and techniques will simplify and
allow you to design optimal processes for your organization from a Con-
trolling perspective. Another important thing to consider while reading
this chapter is that most of these processes follow the same architectural
structure.
5 Optimizing Cost Element Accounting,

Cost Center Accounting, Profit Center
Accounting, and Internal Order
Accounting
In this chapter, you will learn how to configure and implement cost element account-
ing, cost center accounting, profit center accounting, and internal order accounting. We
will clarify some of the key features of each of these components so that you
can standardize and optimize your existing Controlling processes. It is extremely
important for you to think through and map the overall structure of your orga-
nization into these four components. This allows you to launch yourself into a
learning cycle where you can get increased benefits from implementing additional
components.
You will proceed from defining your cost center and profit center hierarchies along
with the cost element and internal order definition, to performing planning in
cost center accounting that can be replicated across other components because
the overall architecture of planning remains the same. You will also learn how
to implement budgeting in cost center accounting and internal order accounting
with availability control setup. The concept of funds commitment is also high-
lighted, which allows you to map out your future commitments. This helps tre-
mendously in analyzing the overall risk that your organization has in terms of
future liabilities.
Internal order lifecycle from creation to settlement is discussed from a functional

and configuration perspective. The tools discussed allow you to optimally design
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5 Optimizing Cost Element Accounting
your internal order lifecycle per your organization’s requirements. In addition,

you will learn about the period-end and fiscal year-end activities that need to
be performed to support the closing processes in Controlling. Figure 5.1 covers
the cost element accounting, cost center accounting, and profit center accounting
structures. Let’s dive into cost element accounting now.
Secondary Cost
Cost Element Primary Cost
Cost Element
Accounting Element
Element Group
Master Data Planning Budgeting

Cost Center
Accounting Commitment
Year End
& Funds Allocations
Closing
Management
Assignments
Profit Center Periodic
Master Data of Profit Planning
Accounting Postings
Centers
Budgeting &
Internal Order Master Data Planning Settlement Availability
Accounting Control
Figure 5.1 Basic Controlling Processes
5.1 Cost Element Accounting
The basic question that cost element accounting answers is the detailed under-
standing of what costs have been incurred. Cost element accounting is not a typical
accounting system but a mechanism to record data from Financial Accounting that
forms the basis of cost accounting. In this component, no routine transactions are
recorded. So the most important aspect in cost element accounting is the master
data that should be created when the relevant GL account is created. Let’s tackle
cost element master data first.
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CostElementAccounting 5.1
5.1.1 Types of Cost Elements

Let‘s learn about the key attributes of cost elements and the process of creating
cost elements:
EE Primary cost elements
Tied to a P&L GL account these elements can either be directly created at the
time the GL account was created or by clicking on Edit cost element or via the
menu path in cost element accounting. You need to have a GL account created
before creating a primary cost element. The costs for a primary cost element
originate outside of Controlling.
EE Secondary cost elements
These are primarily used for allocation cycles and can be created solely in Con-
trolling. Secondary cost elements are used either as intermediary receivers or
senders that must not have real costs. The menu path is SAP Menu • Account-
ing • Controlling • Cost element accounting • Master Data • Cost Element •
Individual Processing • Create Primary/Create Secondary/Change/Display/
Delete/Display changes. The Transactions are KA01/KA06/KA02/KA03/KA04/
KA05.
Figure 5.2 illustrates how a primary cost element can be changed. Let’s review
these steps:
1. Enter the Cost Element “610100”, the Controlling Area, which is seen as US01,
and a Valid From and to date.
2. On the Basic Data tab, to enter a Name and Description.
Figure 5.2 Changing a Cost Element
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5 OptimizingCostElementAccounting
The other options seen on this screen are described here:

EE CElem category identifies the cost element category and can be selected as
follows:
EE 1: Primary Costs/Costs reducing revenue
EE 3: Accrual/deferral per surcharge
EE 4: Accrual/deferral per debit=actual
EE 11: Revenues
EE 12: Sales deduction
EE 22: External settlement
The cost element category allows you to distinguish between primary and second-
ary cost elements. These can be used to distinguish within the primary cost ele-
ments whether it is a cost element (expense account) or revenue element (revenue
account):
EE Attribute mix
This can be used to further distinguish the cost elements per your
requirements.
EE Functional Area
This allows you to represent your departments as functional areas such as pro-
duction, sales, marketing, administration and so on. This allows you to create
P&L accounting per cost of sales accounting. The functional area entered in the
corresponding GL master flows to the cost element master data as well and can-
not be entered from this screen.
In Figure 5.3, you can see the indicators for recording quantity, where the unit of
measure can also be entered.
Figure 5.3 Defining Indicators
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CostElementAccounting 5.1
EE Record qty
This flag allows you to record quantities against the cost element.
EE Unit of Measure
This identifies the unit of measure for posted activities.
EE Selecting the Default Acct Assgnmt tab brings you to the screen shown in Fig-
ure 5.4.
Figure 5.4 Defining Default Account Assignment for Cost Element
This is where you can define the default cost center or order for a particular cost
element. This setting is useful only if cost elements map to the same cost center
across all company codes. Remember, you learned about defaulting cost centers
and orders by valuation area and cost element earlier in Chapter 4. The History
tab records all the changes made on the cost element.
5.1.2 Cost Element Group

The cost element group is a grouping of similar cost elements for reporting purposes.
By using cost element groups, you can build a hierarchical cost element structure
that can be extremely useful for reporting purposes. You can use cost element
groups in all the Controlling transactions such as cost center planning and alloca-
tion cycles. This allows you to process all the cost elements in one transaction. The
menu path is SAP Menu • Accounting • Controlling • Cost element accounting •
Master Data • Cost Element Group • Create/Change/Display. The Transactions
are KAH1/KAH2/KAH3. Figure 5.5 shows the screen for changing an existing cost
element group, CANA.
The cost element groups are broken into these headings: Manufacturing, Operat-
ing Expenses, Other Expenses, and Secondary Cost Elements. Manufacturing is
then broken up into SAP Manufacturing Clearing Accounts, Inventory Reserves,
and Manufacturing Variances. Primary cost elements (510000 to 510099) are
then assigned to SAP Manufacturing Clearing Accounts.
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Figure 5.5 Changing an Existing Cost Element Group
To change an existing cost element group, assign new cost elements or change the
assignment of cost elements to a different level. The Same Level and Lower Level
buttons help create a cost element group at the same level or creates a new lower
level below the same level, respectively. The other two buttons for Cost Element
allow you to insert a cost element or to display a cost element attached to a cost
element group.
Now let’s move on to cost center accounting.
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Cost Center Accounting 5.2
5.2 Cost Center Accounting
Cost center accounting (CO-OM-CCA) is used for internal Controlling purposes

and to make the costs more transparent in an organization. The overall objective of
CO-OM-CCA is to trace the source of a cost. If you have overhead costs, they need
to be allocated to the actual department that owns that cost. Table 5.1 shows you
the three types of decision-making responsibilities that a manager can have.
Responsibility Responsibility of Performance Examples

Areas Manager Metrics
Cost Center Managing costs per Plan versus Actual HR department, IT
plan Costs department
Profit Center Manages costs Operating Results Manufacturing
and responsible of the Profit Center units
for generating
revenues. Owns
the overall profit of
the group.
Investment Center Manages costs and Return on Business unit
revenues and can Investment
make investment
decisions.
Table 5.1 Types of Responsibility Areas
Cost center accounting focuses only on costs allowing you to detail out the costs
and makes the managers responsible for the costs incurred by their departments.
Note
Cost center accounting is typically one of the earliest components that an organization
implements.
Figure 5.6 shows you the process involved. Let’s examine master data first.
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Cost Center Activity Statistical

Cost Center
Master Data Cost Center
Group
Standard Type & Key Figures Resources
Hierarchy Group & Group
Periodic Manual Resource Formula

Planning Allocations
Activities Planning Planning Planning
Budget Budget
Management Profile
Commitment
Document Number
and Funds Activate Field Control
Commitments Types Ranges
Costing
Costing
Overhead Sheets
Sheet
Components
Activity
Allocations Assessment Distribution
Allocation
Year End Commitment

Closing Carryforward
Figure 5.6 Cost Center Accounting
5.2.1 Cost Center Accounting Master Data

First you will learn about the various master data elements of cost center account-
ing such as cost center, cost center group, cost center standard hierarchy, activity
type and activity type group, statistical key figures, and resources. Then you will
learn about the following cost center accounting business transaction. The most
important aspect in cost element accounting is the master data.
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CostCenterAccounting 5.2
Cost Center
Cost centers are the organizational units where costs are incurred. These can be
created from a variety of perspectives such as responsibility, physical location,
and functional area. The structure of the cost center is heavily dependent on each
organization and mimics the organization structure.
Before creating a cost center, you should outline the standard hierarchy to guide
the overall structure and set of the cost centers. Each cost center needs to be
assigned to the standard hierarchy. Standard hierarchy needs represent a grouping
of all the cost centers for a particular Controlling area. This allows you to visualize
your organization from the Controlling perspective. The menu path to follow for
creating, changing, displaying change is SAP Menu • Accounting • Controlling •
Cost center accounting • Master data • Cost Center • Individual Processing • Cre-
ate/Change/Display/Delete/Display Change. The Transactions are KS01/KS02/
KS03/KS04/KS05.
To understand more about a cost center, let’s take a look at how a cost center looks
in cost center accounting. Figure 5.7 shows you the Basic data tab of the cost cen-
ter screen where you can change the Cost Center 10100. All the cost centers are
created for a Controlling Area US01 with Valid From and to dates.
Figure 5.7 Entering Basic Data in Cost Center Master Data
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You need to maintain the following parameters identifying the cost center:
EE Name and Description
This identifies the name and description of the cost center.
EE User Responsible
This is the SAP user ID of the responsible person.
EE Person Responsible
This is free form text with which you can maintain the responsible person even
if you have not created a SAP user ID.
EE Department
This can be used to capture the department of your organization and is used for
reporting purposes.
EE Cost Center Category
This identifies the category of the cost center and can be used to build addi-
tional logic for activity types. Typical examples for a cost center category are
production, sales, and administration.
EE Hierarchy area
This can be used to map the cost center to the standard hierarchy components.
You have to choose a predefined hierarchy area for your cost center.
EE Business Area
This can be used to link the business area to the cost center.
EE Functional Area
This can be used to establish the link between the cost center and the functional
area.
EE Currency
This identifies the currency of the cost center.
EE Profit Center
This can be used to assign profit centers to the cost center.
Figure 5.8 displays the screen for maintaining the control parameters. You can
choose to record quantity by flagging the Record Quantity. You can choose to
lock the parameters for data entry for the cost center. For example, in this case,
we have chosen to not record any Actual revenues or Plan revenues for the iden-
tified cost center.
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Figure 5.8 Control Parameters for Cost Center Master Data
Figure 5.9 shows you a view of the Templates tab and the information you will
need to populate it with.
Figure 5.9 Cost Center Templates
This is where you can maintain the various cost models that are relevant for the
formula planning, activity and business process allocation, and overhead rates. You
will learn more about these in the planning Section 5.2.2. On the Address tab,
you need to maintain the correspondence address details. The Communication
tab has the data related to telephone numbers, fax number, and printer destina-
tion. The History tab has the details pertaining to any changes that were made in
the cost center. Now that you understand the cost center, let’s take a look at the
cost center group.
Cost Center Group

Cost center groups allow you to depict your organizational structure by grouping
similar types of cost centers in a group. The menu path to create, change or dis-
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play the cost center group is SAP Menu • Accounting • Controlling • Cost center
accounting • Master data • Cost Center Group • Create/Change/Display. The
Transactions are KSH1/KSH2/KSH3.
Figure 5.10 shows you the cost center group US01 that has been set up. You have
the broad classification of Sales, Marketing, Manufacturing, General & Admin-
istration, and Assessments. Within General & Administration, you can have
further cost center groups of G & A Finance, G & A- Human Resources, and G & A-
Legal. The cost center is ultimately assigned to a cost center group because 10100,
defined in the previous step, is assigned to Sales cost center group 101.
Figure 5.10 Cost Center Group
Cost Center Standard Hierarchy

By combining all the cost center groups together for an organization, you essen-
tially build up your standard hierarchy. This includes all the cost centers for a
given period that are active, which allows you to look at your organization from
an overall Controlling perspective. The menu path is SAP Menu • Accounting
• Controlling • Cost center accounting • Master data • Standard hierarchy •
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Change/Display, and the Transactions are OKEON/OKENN. Figure 5.11 shows

you the screen depicting your standard hierarchy US01. The maintenance screen
is divided into four broad areas:
EE The top-left pane is the search area where you can find a cost center or cost
center group by search criteria.
EE The bottom-left pane shows the results of your search.
EE The top-right pane shows the overview area.
EE The bottom-right shows the details for cost center sales that you have selected
in the overview area.
Figure 5.11 Maintaining the Standard Hierarchy of Cost Center
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You can drag and drop the cost centers that you find in your search list into the
overview pane. As you can see, this is similar to the cost center group structure
that you saw in the previous step. However, the distinction is that every cost cen-
ter should be part of the standard hierarchy, which is not the case with the cost
center group.
Activity Type
This allows you to enter the different activities in cost center accounting for your
Controlling area. You can also record quantities that are measured in activities. You
can then use activities to set up your rules for allocation cycles. Activity types can
be directly tied to a cost center also. The menu path is SAP Menu • Accounting •
Controlling • Cost center accounting • Master data • Activity Type • Individual
Processing • Create/Change/Display/Delete/Display changes. The Transactions
are KL01/KL02/KL03/KL04/KL05.
Figure 5.12 shows you how to create an Activity Type KWH by Controlling Area.
On the Basic Data tab, the Name and Description of activity type KWH is Power
KwH and Power Units consumed per month, respectively. The activity unit is
identified as KWH, whereas the cost center category is marked as W, which rep-
resents administration. You can also set Allocation default values for the activity
type, which is used when you are running your allocation cycles. Let’s take a look
at the various types now:
EE ATyp category identifies the method of activity quantity planning and activity
allocation.
EE Allocation cost elem is the secondary cost element that is used to allocate the
activity type.
EE Actual qty set allows you to manually enter the quantity that you want to
receive in the receiver.
EE The Average price flag means that the activity process for the activity remains
the same throughout the year.
EE Plan quantity set sets the plan quantity and prevents you from changing it dur-
ing planning.
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Figure 5.12 Create Activity type
You can lock this activity by marking the Lock indicator in the Indicators tab. Out-
put unit and Output factor can be maintained in the Output tab. The History tab
records any changes that happen for the activity type.
Activity Type Group

This allows you to group similar activity types together so that you can use these
when executing transactions in cost center accounting. The menu path is SAP
Menu • Accounting • Controlling • Cost center accounting • Master data • Activ-
ity Type Group• Create/Change/Display, and the Transaction is KLH1/KLH2/
KLH3. Figure 5.13 shows that KWH and FST are grouped in the POWER activ-
ity group. You can use Same Level to add more activity types to this group. You
can create subgroups and attach them to this main activity group by using Lower
Level.
Figure 5.13 Defining the Activity Type Group
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Statistical Key Figures

Statistical key figures can be used to represent cost centers, activity types, orders,
business processes, profit centers, or real estate objects. These are primarily used
as parameters for running allocations such as distribution or assessment. The
menu path is SAP Menu • Accounting • Controlling • Cost center accounting •
Master data • Statistical Key Figures• Individual Processing • Create/Change/
Display/Delete. The Transactions are KK01/KK02/KK03. Figure 5.14 shows you
the statistical key figure MITARB that represents Employees. You need to define
a unit of measure for your statistical key figure. For units with no dimensions, ST
can be used.
Figure 5.14 Display Statistical Key Figure
The statistical key figure can be defined as either Fxd val. (fixed value) or Tot. val-
ues (totals values). Fixed values are constant and are applied through the rest of the
fiscal year. On the other hand, totals values are applied only for the fiscal period
in which the allocation cycle is run.
Statistical Key Figure Group

Statistical key figures allows you to group statistical figures together so that they
can then be used in cost center accounting transactions. Statistical key figures
used as tracing factors can then be collected in groups during allocation process-
ing. Follow SAP Menu • Accounting • Controlling • Cost center accounting •
Master data • Statistical Key Figure group• Create/Change/Display. You can also
use Transactions KBH1/KBH2/KBH3. Figure 5.15 shows you the statistical figure
EMPLOYEE that has been created for statistical figure MITARB.
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Figure 5.15 Create Statistical Key Figure Group
Resources
Resources are goods and services that are used in various business processes.
Resources can be used to generate detailed planning activities for cost center plan-
ning, orders, and WBS elements. These provide you with one more layer of report-
ing other than cost elements. The menu path is SAP Menu • Accounting • Control-
ling • Cost center accounting • Master data • Resources group• Create/Change/
Display, and the Transactions are KPR2/KPR2/KPR3.
Figure 5.16 shows how to add a resource by CO Area (Controlling area). You need
an identifier for Resource Machine1 with Valid From and Valid To dates. The unit
of measure also needs to be maintained. In the Name field, you can enter a gen-
eral description of the resource. Cost ele.. refers to the cost element for which the
resource can be planned. If nothing is entered then the resource can be used across
all the primary and secondary cost elements. Plnt specifies the logistics plant for
which the resource can be planned.
Figure 5.16 Create Resources
Note
Resource cannot be used for actual costs. It can only be used for planning. All other
objects can be used for planning and actuals
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5.2.2 Cost Center Planning

Cost center planning forms the part of short-term planning that typically has the
time span of a fiscal year. In cost center planning, you enter the plan values for
costs, activities, and statistical key figures for a particular cost center and planning
period. This is done prior to you recording the actuals and allows you to compare
the variances between actuals and plan values. Any large variances act as a signal
to take corrective action and fix any business processes. Typically, organizations
implement cost center planning initially, get in the rhythm of using the informa-
tion, and then move on to complex Controlling initiatives. But this forms the
building block of all your Controlling activities and is a strong prerequisite before
you implement standard costing.
Cost center planning allows you to monitor, control, and plan the Controlling
business structure by clearly outlining the goals and targets and then measuring
them against it. Here you will learn to define the parameters for manual planning,
resource planning, and formula planning and to recognize when you will use each
type of planning.
Note
It is very important that the planning done in cost center planning lead to actionable
items. If it is just a report spat out by the system and nobody does anything about it,
then it is merely an academic exercise, carried out as a chore every month by accoun-
tants. Take action based on what you see.
In this section, you will learn about the key settings of manual cost center plan-
ning that can be used to plan statistical key figures, activity types, primary costs,
secondary costs, budget planning, and so on. You can integrate manual planning
with internal orders and PS as well. It is also possible to interface manual planning
via the manager’s desktop. Even though manager’s desktop is primarily meant for
administrative and organizational management tasks, you can use it to support
manual planning functions in Controlling. You can customize the planning profiles
and planning layouts per the manager’s requirements, which allows them to per-
form routine manual planning tasks directly from the manager’s desktop.
Let’s see how we can perform manual planning using primary costs as a simple
example.
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Costing Variants
Defining costing variants is the first step towards enabling you to plan at a level
below the cost element. For example, if you want to track the cost at each cost
center by material rather than by the cost element, you need to define a costing
variant. You can follow the menu path IMG • Controlling • Cost center accounting
• Planning • Manual Planning • Detailed Planning of Primary Cost Elements•
Define Costing Variants, or use Transaction OKY4.
Figure 5.17 shows a costing variant comprised of Costing Type and Valuation
Variant. In our example, Costing Type has been chosen as Primary Cost Element,
whereas the Valuation Variant is also chosen as Vltn-Primary Cost Element. These
get defaulted and cannot be changed for Costing Variant PP. You can define a new
costing variant to choose a different combination.
Figure 5.17 Define Costing Variant
Tip
Don‘t create two costing variants with the same costing type and valuation variant
because results of the detailed planning execution for one of the variants can override
the other. It is recommended that you use different valuation variants to each costing
variant that you save.
Valuation Variant
This contains a strategy sequence for selecting prices from the material master. The
menu path is IMG • Controlling • Cost center accounting • Planning • Manual
Planning • Detailed Planning of Primary Cost Elements• Define Valuation Vari-
ants, and the Transaction is OKY8. Figure 5.18 shows you the valuation variants
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that can be selected for a costing variant. For our example, 013: Vltn-Primary Cost
Elem has been selected.
Figure 5.18 Define Valuation Variant
By double-clicking on this, you will reach the screen shown in Figure 5.19 where
you can maintain the Strategy Sequence in which the material price will be deter-
mined. The identified sequence is shown under Strategy Sequence, which is the
sequence in which the system searches for prices in the accounting view of the
material master.
Figure 5.19 Define Valuation Variant Details
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Now that you understand how you can set up an additional layer of reporting for
cost center planning, let’s take a look at resource planning, which can be used to
support the cost center planning.
5.2.3 Resource Planning

Resource planning helps you carry out detailed planning by resources. This allows
you to plan the cost elements from a resource perspective by identifying the quan-
tity of resources consumed. You can maintain the price of the resources separately,
which allows you to calculate the consumption value of the resources. Resource
planning allows you to capture an activity whose origin is external rather than
internal, which is used when you perform activity input planning. The posting in
resource planning happens on the primary cost element.
Price Table definition

In this step, you need to either select the pricing table (that you want to use) or
copy an existing table and modify it to define your own price table for resource
planning. You can follow IMG • Controlling • Cost center accounting • Planning
• Resource Planning • Define Price Tables, or use Transaction KPRI. The following
standard tables are available:

EE 132: Price per Cost Center
EE 136: Price per Controlling Area
EE 137: Price per Country/Region
EE 138: Price per Company Code/Business Area
EE 139: Price per Profit Center
After defining your table, you need to configure your access sequence (AS) for
resource planning.
Access Sequence Definition

This allows you to search valid prices for each condition type. The menu path to fol-
low is IMG • Controlling • Cost center accounting • Planning • Resource Planning
• Define Access Sequence. Figure 5.20 shows you the standard access sequence
(AS) K001: Cost Center Resources that can be used for resource planning.
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Figure 5.20 Define Access Sequence
If you select K001 and click on Accesses, you reach the next screen shown in Fig-
ure 5.21. Let’s look at the tables that can be used for entering the resources by
cost centers:
EE 132: Price per Cost Center
EE 137: Price per Country/Region
EE 136: Price per Controlling Area
As you can see, the AS moves from more specific prices (By Cost Center) to general
prices (By Controlling Area). The Exclusive indicator stops any further searching
if the correct combination of resource per prices has been found.
Figure 5.21 Define Access and the Table Sequence
By selecting Table 132 and clicking on Fields you reach the screen shown in Figure
5.22. This identifies the parameters by which you can enter the resource prices.
For our example, you can enter the resource prices by Controlling area, version,
resource, and cost center.
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Figure 5.22 Identify the Fields and Tables
Condition Types
Condition types control how you enter the prices of resources: an absolute amount,
percentage, manually specified price, or derived from the material master. Each
condition type requires you to maintain the AS that allows you to search the sys-
tem per your requirements. The menu path is IMG • Controlling • Cost center
accounting • Planning • Resource Planning • Define Condition Types and the
Transaction is KPR4. Figure 5.23 shows how to maintain the condition type for
maintaining the resource prices. It ties the condition type (CEl..) CQ01 with access
sequence (AcSq) K001.
Figure 5.23 Define Condition Types for Resource Prices
By selecting the condition type CQ01 and selecting Condition records, the popup
shown in Figure 5.24 appears. Here you can need to choose an appropriate access
from the AS. In our example, we chose Price per Cost Center.
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Figure 5.24 Choose the Access Sequence
On pressing Enter, you reach the next screen shown in Figure 5.25, where you will
choose the Controlling Area “US01”. If you want, you can further narrow it down
with Version and Fiscal Year. Application and Usage get defaulted as CQ and A,
respectively, and cannot be changed.
Figure 5.25 Select the Controlling Area, Version, and Year
Upon pressing Enter, you can maintain the resource prices in the next screen as
shown in Figure 5.26. Here you need to maintain the Resource, FrP (Fiscal Period
from which the Price is effective), Cost Ctr (Relevant Cost Center), Amount, Curr.
(Currency of resource price), and PrUn. (Price unit).
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Figure 5.26 Enter the Resource Name and Prices
Costing Sheets
Costing sheets is the equivalent of the pricing procedure in purchasing and SD in
cost center accounting. You specify the selected condition types you will be using
and identify the sequence in which the condition types will be used for resource
planning. The menu path is IMG • Controlling • Cost center accounting • Plan-
ning • Resource Planning • Define Costing Sheets. The Transaction is KPRC. Fig-
ure 5.27 shows you the RES1: CO Resource Prices costing sheet.
Figure 5.27 Define Costing Sheets
By selecting RES1: CO Resource Prices and clicking on Costing Sheet Rows you
will reach the next screen as shown in Figure 5.28 where you can choose the steps
of Costing sheet Rows. Here the condition type Resource prices is maintained as
shown earlier in the condition type definition.
Figure 5.28 Define Costing Sheet Rows
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Valuation Variant:
You learned earlier about valuation variant in 5.2.2. In this step, you will learn
to define the valuation variant from the resource planning perspective. Valuation
variant essentially houses the costing sheets. This is where it all comes together as
far as resource planning is concerned. Valuation variant determines the processing
sequence of the costing sheets. You can follow this menu path IMG • Controlling •
Cost center accounting • Planning • Resource Planning • Define Valuation vari-
ants. The Transaction is KPR8. Figure 5.29 shows you the valuation variant for
resource planning. The valuation variant needs to be defined by Controlling area.
C.Analysis allows you to test whether your condition types are working properly.
These should not be flagged in normal operations.
Figure 5.29 Define Valuation Variants
Assign Costing Sheets to Valuation Variants

In this step, costing sheets are assigned to the valuation variant. The menu path
is IMG • Controlling • Cost center accounting • Planning • Resource Planning
• Assign Costing Sheets To Valuation Variants. The Transaction is KPR8. Figure
5.30 shows how you can assign the costing sheet (Proc.) RES1 to the valuation
variant (Var) 100.
Figure 5.30 Assign Costing Sheets to Valuation Variants
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5.2.4 Cost Center Budget Planning

Cost center accounting also allows you to set up your monthly budget by cost cen-
ter. It allows you one more tool to plan in addition to primary cost planning and
secondary cost planning. You can compare the actual values against the budgeted
values and establish timely availability checks in case the budget is exceeded. This
is where you will learn the process of budgeting from cost center accounting and
the relevant settings that you will need to make to enable the budgeting process.
The prerequisite to implementing budget planning is to create a budget profile.
Budget Profile
The budget profile allows you to establish the structure of budgeting in cost center
accounting. The menu path to follow: IMG • Controlling • Cost center account-
ing • Budget Management • Define Budget Planning Profiles. The Transaction
is OKF1. Figure 5.31 shows you the standard cost center budget profiles that are
available. You can copy these to create your own profile that meets your unique
requirements.
Figure 5.31 Define a Cost Center Budget Profile
Let’s take a look at the COST00 by double-clicking on the profile. This takes you to
the Figure 5.32 where you can maintain the properties for the budget profile.
Figure 5.32 Detailing a Cost Center Budget Profile
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Let’s review these now:

EE Time Frame
Here you can maintain the budgeting analysis period in the Past and in the
Future. You can also maintain the start period for the budgeting process. In
addition, by flagging Annual Values and Period Value, you can indicate that
you want to perform budgeting for the whole fiscal year and for the individual
fiscal periods, respectively.
EE Distribution Key
This identifies how the values are distributed across the fiscal periods. The vari-
ous options follow:
EE 0: Manual distribution.
EE 1: Equal distribution.
EE 2: Distribution as before.
EE 3: Distribution by percentage.
EE 4: Distribute according value to following no-value periods.
EE 5: Copy values to following no-value periods.
EE 6: Carry forward single value.
EE 7: Distribute according to number of days in period.
Decimal factors and Scaling factors control how the data will be shown when
you output the data. After setting the budget profile, you can enter the cost center
budgets using the transaction described next.
Entering Cost Center Budgets

Here you can enter the budgets against the cost centers. The menu path SAP
Menu • Controlling • Cost center accounting • Planning • Cost center budgets •
Change/Display. The Transaction is KPZ2/KPZ3. Figure 5.33 shows you the screen
for entering the budget. You need to enter the Profile and Cost Center or Cost
center group to enter your budget.
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Figure 5.33 Change Budget Planning
Figure 5.34 shows how you can enter the budget for Cost Center 10100, Control-
ling Area US01, and current year 2007 Period 1 as 10,000.00 USD.
Figure 5.34 Enter the Budget by Period and Cost Center
This can then be compared against the actual values, and you can monitor if the
budget is within the limits.
5.2.5 Commitment and Funds Commitment

This allows you to enter commitments in Controlling that happen only via Finan-
cial Accounting. Funds commitment is used to reserve the budget in case you do
not know how the actual transactions will happen and when, but you want to keep
the budget as a reserve for forecasted revenues and expenses. Funds commitment
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can be used to reserve the budget for cost centers, internal orders, and projects.
In this subsection, you will learn about the configuration setting of commitments
and funds commitments. Figure 5.35 shows the process by which commitments
and funds commitments are configured.
Activate
Commitments
and Funds
Commitment
(OK01)
Define Number Define

Ranges Assigned Document
(OK60) Types
Define Field Define Field

Status Variant Status Group
(FMU3) (FMU5)
Assign Assign
Assign
Assign Field
Define Field
Status Variant
Selection String
to Company
(FMU7)
Code (FMU5)
Hide Display Optional Required
Figure 5.35 Configuring Funds Commitment in Cost Center Accounting
Let’s examine this process now.
Activate Commitments Management

In this step, you activate the commitments management in the Controlling area.
You already learned how to activate components in Chapter 4, so we will not go
into the details. The menu path IMG • Controlling • Cost center accounting •
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Commitments and Funds Management • Activate Commitments Management

• Activate Commitments Management in Controlling Area. The Transaction is
OK01.
Define Number Ranges for Funds Commitment

In this step, you define the number range for document types to be posted in
funds commitment. The menu path is IMG • Controlling • Cost center account-
ing • Commitments and Funds Management • Define Number Ranges for Funds
Commitment. The Transaction is OK60. Figure 5.36 shows you the screen for
maintaining the number ranges for funds commitments documents. You need to
click on Interval and then define the number ranges with the range of documents.
The figure shows the number range (No.) 01 with the document numbers From
number 0000000001 To number 0099999999.
Figure 5.36 Define Number Ranges for Funds Commitment
Document Types for Funds Commitment

Now you need to define the attributes of document types. The menu path is IMG
• Controlling • Cost center accounting • Commitments and Funds Management
• Define Document Types for Funds Commitment. Figure 5.37 shows you the
screen for maintaining the document types for funds commitment. This shows the
broad heading of Document Types for Earmarked Funds.
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Figure 5.37 Define Document Types for Funds Commitment
The parameters for document types are:

EE DT/ Doc. type description
This identifies the document type with the document type description.
EE Numb..
This identifies the number range that is assigned to the document type.
EE FstG
This is the field status group that is tied to the document type.
EE Type
This is the group key for the earmarked fund copying template.
EE Workfl..
This will indicate what the posting time will be when you request it via
workflow.
EE Nega
This indicates that only negative amounts are allowed in this document type.
Field Status Variant

In this step, you will define the field status variant. The field status variant, the
field status group, and the field selection string allow you to control which fields
are required, displayed, optional, or suppressed. You can follow this menu path
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for defining the field status variant: IMG • Controlling • Cost center accounting •
Commitments and Funds Management • Field Control for Funds Commitment •
Define field status variant. You can also use Transaction FMU3. Figure 5.38 shows
the field status variant FMRE that has been defined for funds reservations.
Figure 5.38 Define Field Status Variant
Assign Field Status Variant to Company Code

Now you need to assign this to your company code. To do this you will need to
follow this menu path: IMG • Controlling • Cost center accounting • Commit-
ments and Funds Management • Field Control for Funds Commitment • Assign
field status variant to company code.
Define Field Status Group

This is the point at which you define the field status group. You will need to fol-
low the menu path IMG • Controlling • Cost center accounting • Commitments
and Funds Management • Field Control for Funds Commitment • Define field
status group, or use Transaction FMU5. Figure 5.39 shows the Field status group
G001.
Figure 5.39 Define Field Status Group
Define Field Selection String

Field selection string allows you to outline which fields will be hidden, display
only, optional entry, or will be required entry. The menu path to follow is IMG •
Controlling • Cost center accounting • Commitments and Funds Management •
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Field Control for Funds Commitment • Define field selection string. The Trans-
action to be used is FMU7. Figure 5.40 shows you the screen for maintaining the
Field sel. (field selection string) MITTELRESER: Funds Reservations.
Figure 5.40 Define Field Status String
By selecting MITTELRESER and then clicking on Maintain Field Status for Field
Selection String, you will see the screen shown in Figure 5.41. In this screen, you
can maintain the individual fields such as Fund as Opt. entry; whereas Funds
Center is a Req. Entry.
Figure 5.41 Define the Field Status Selection String
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Assign Field Status String

In this step, you assign the field status string to the field status variant and the
field status group. The menu path is IMG • Controlling • Cost center accounting •
Commitments and Funds Management • Field Control for Funds Commitment
• Assign field status string, and the Transaction is FMUN. Figure 5.42 shows you
the screen where you can assign Field selctn string (field selection string) MITTEL-
RESER to the Field Status Variant FMRE and Field Status group G001.
Figure 5.42 Assign Field Status String
5.2.6 Overhead Costing Sheets

Labor and material costs form one component of the overhead costs. Overhead
costing is used to allocate the overhead. The basis of the overhead calculation is
based on the primary cost elements that are classified as overhead costs. These
costs can then be allocated by either percentage or quantity. Overhead costing can
be allocated both on the plan data and actual values. Before you begin configuring
the costing sheet, you need to define secondary overhead costing elements with
the cost element type of 41.
Define Costing Sheet

As you learned earlier, the costing sheet pulls all the things together in one neat
package. It integrates all the components of overhead costing. You can follow this
menu path: IMG • Controlling • Cost center accounting • Actual Costing • Period
End Closing • Overhead • Define Costing Sheets. Figure 5.43 shows how you can
define a costing sheet for overhead costing. As you can see, Costing Sheets are
identified in the right pane. You can, however, define the Costing sheet rows that
have the all the details, including the base rate, overhead rate, and credit details
by rows.
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Figure 5.43 Define Costing Sheets
If you select the costing sheet (Costin) A00000:Standard in the right pane and
click on Costing sheet rows on the left pane, then you will reach the next screen
shown in Figure 5.44. As you can see, basic Material cost and Material OH (mate-
rial overhead) have been maintained. These options are then added to Wages and
Salaries along with the Manufacturing OH (manufacturing overhead) to give you
the Cost of goods manufactured. This when added with Administration OH and
Sales OH gives you the Cost of goods sold.
Figure 5.44 Define Costing Sheet Rows
You can maintain each of these components separately by identifying which cost
elements pertain to which type of calculation Base. You have to click on Base to
maintain these, which will take you to next screen as shown Figure 5.45. This
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screen shows you the Calculation base of B000: Material. Here the range of Cost
Elements 510000 and 510040 are maintained as pertaining to material costs.
Figure 5.45 Define Base
Clicking on Overhead rate (Figure 5.45) brings up the screen seen in Figure 5.46,
which is where the overhead rates can be maintained.
Figure 5.46 Define Overhead Rate
The O/H rate C000: Material OH has been maintained as 25 % for Ovrhd type 1.
You can maintain the following overhead types:
EE 1: Actual overhead rate.
EE 2: Planned overhead rate.
EE 3: Commitment overhead rate.
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If you click on Credit, you can maintain the Cost Element and Cost Center for the
credit element in the costing sheet as shown in Figure 5.47. Here the Cost Elem.
840000 and Cost Center 30100 have been maintained for the Credit E01: Credit
Material.
Figure 5.47 Define Credit in the Costing Sheet
5.2.7 Allocations
The allocation process in cost center accounting allows you to transfer costs across
your organization according to predefined business rules. Allocations allow you
to transfer costs collected in a cost center to receivers per a predefined rule and
allow you to record costs as they occur. Then on the basis of business rules you
can allocate them at period end to get an accurate picture.
Example
If you treat finance as administrative overhead, then you will want to record the em-
ployee wages and salaries initially in the finance cost centers because it would be highly
inefficient to record this transaction when it actually occurs. However, at month end,
you need to allocate the costs to business units per predefined rule such as number of
employees in each department or number of financial transactions recorded for each
department.
Allocation methods simplify data entry and are easy to use because these rules are
defined only once and then the allocations are run at month end. There are two
types of allocations:
EE Assessment, which is used in allocating primary and secondary costs in cost
center accounting and activity-based costing
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EE Distribution, which is used in allocating primary costs in cost center

accounting
Table 5.2 highlights the difference between distribution and assessment allocation
processes per important parameters. This will allow you to distinguish between
these two processes.
Parameters Assessment Distribution

Original Sender Cost Sender cost elements are Primary cost element is
Element assigned cumulatively retained in the receiver.
and are not recorded in
receivers.
Sender and Receiver Controlling document Controlling document’s
Information contains the sender and line item has the sender
receiver information. and receiver information.
Utility When you do not want This is important if you
to know the composition want the details pertaining
of costs. For example, to individual costs that
you just want to know make up the composition
the overall administrative of the overhead. For
overhead applied and not example, when you are
the details such as the cost trying to understand what
of writing paper, cost of percentage was sales
cafeteria, and so on. administration versus sales
marketing, which added as
an overhead to the sales.
Table 5.2 Difference Between Assessment and Distribution
5.2.8 Year-End Closing

Now you will learn how to carry forward commitments to the next fiscal year.
During year end, you can carry forward commitment values from purchase requi-
sitions, open purchase orders and contracts, and fund commitments. You can fol-
low SAP Menu • Accounting • Controlling • Cost center accounting • Year End
Closing • Commitment Carryforward, or use Transaction KSCF. Figure 5.48 shows
the selection parameters (Cost center range) for carrying forward commitments
to the new fiscal year.
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Figure 5.48 Fiscal Year Carryforward of Commitment
After you execute this transaction, the commitment will show up in the period 1
of the new fiscal year. You can execute this in Test run before you run it for real.
If you want to reverse the commitment carryforward, you can check the Reversal
flag and execute the transaction.
Let’s move to profit center accounting now.
5.3 Profit Center Accounting
Profit center accounting (PCA) is primarily used for management-related reporting

for internal purposes. It is primarily used for profit center reporting by either the
cost of sales method or the period accounting method. Defining an organizational
unit as a profit center entails that the unit is managed independently by a person
who is responsible for the profit (revenue and costs) of the unit. There is always
some confusion about the role of PCA and how it is different from other compo-
nents such as profitability analysis and special purpose ledger. All these can be
used to support profitability reporting, but they have different perspectives. The
key differences are highlighted in Table 5.3.
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Profit Center Accounting 5.3
Parameters Profit Center Profitability Special Purpose

Accounting Analysis Ledger
Focus Internal External Can be both
Functional Responsibility and Market oriented Primarily for
viewpoint person focused accounting; not for
reporting
Technology Special case of Based on a Very custom
viewpoint special purpose different concept solution that
ledger altogether of can be used to
characteristics and enhance profit
value fields center accounting
Integration Separate and Highly integrated. Can have its
with operative independent profitability own account
accounting of account segment is a assignment objects
assignment objects key account
assignment object
Table 5.3 Distinctions Among CO-PCA, CO-PA, and FI-SL
Figure 5.49 shows you the process for profit center accounting.
Profit Center Dummy

Master Data Profit Center
Group Profit Center
PP & CO
Cost Business Fixed
Materials Production Projects
Centers Processes Assets
Orders
Assignment
Monitor
Process Maintenance Internal Sales Real Estate
Cost Object
Orders Orders Orders Orders Object
Number
Periodic Choose
Basic Ranges and
Additional B/S
Activities Settings Document and P&L
Types
Period End Transferring

Carryforward Payables/
Closing Receivables
Figure 5.49 Profit Center Accounting
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Let’s start by learning about the profit center master data.
5.3.1 Profit Center Master Data

In this subsection, you will learn the key attributes of profit center and the process
of creating a profit center.
Create Profit Center

Profit center represents the management-oriented organization unit that allows
you to understand how costs and revenues are being managed within a responsi-
bility area. The menu path is SAP Menu• Accounting• Enterprise Controlling •
Profit center accounting • Master data • Profit Center • Individual Processing •
Create, and the Transaction is KE51.
Figure 5.50 shows you the Basic data for profit center maintenance. Profit center is
always created for a Controlling Area US01. You need to maintain the Name, Long
Text, and Analysis Period. Initially, the Status will be Inactive: Create when you
are first creating your profit center. You need to maintain the User Responsible,
Person Respons., Department, and Profit Ctr Group. Profit center group should
be the part that conceptually is similar to the standard cost center hierarchy.
Note
With the introduction of the new GL, you can also maintain the Segment for a profit
center.
Figure 5.50 Create Profit Center
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ProfitCenterAccounting 5.3
Clicking on the Indicators tab brings you to the screen shown in Figure 5.51.
Figure 5.51 Indicators within the Profit Center Master
Here you can check Lock Indicator if you do not want any postings to happen to
this profit center. You can also maintain the Formula Planning Template (Form.
Planning Temp.). If you click on the Company codes tab, you will see all the CoCd
(company codes) assigned automatically to the profit center, which belong to the
Controlling area as shown in Figure 5.52 You can choose to dis-associate some
company codes from the profit center if desired.
Figure 5.52 Company Code Assignment
Address and Communication details can be maintained in their respective tabs.

The History tab displays all the changes that you make in the profit center.
Create Profit Center Group

You can create profit center groups to group similar profit centers that can then be
used in various reporting tools. This allows you to create a hierarchical structure of
profit centers. The process of creation is similar to the cost center group creation.
The standard hierarchy of profit centers is a special case of profit center groups
that contain all the profit centers of your organizations for a Controlling area. The
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menu path to follow is SAP Menu • Accounting • Enterprise Controlling • Profit

center accounting • Master data • Profit Center Group • Create. You can also use
Transaction KCH1.
Create Dummy Profit Center

You need to create a dummy profit center in profit center accounting so that if
the system does not find any assigned profit centers for some objects, it posts the
dummy profit center. This allows you to post the financial data and keep that in
sync. The menu path is IMG • Enterprise Controlling • Profit center accounting
• Master data • Profit Center • Create Dummy Profit Center, and the Transaction
is KE59.
Tips
E Do not use the dummy profit center as a dumping ground for your postings to be allo-
cated later. It can create a major month-end close headache, and it is never advisable
to run allocation cycles from the dummy profit center.
E Dummy profit centers need to be thoroughly analyzed at month end and should be
cleaned up every month. Otherwise, you will not get a true picture of your profit-
ability by responsibility area.
Figure 5.53 shows how you can create a DUMMY profit center.
Figure 5.53 Define Dummy Profit Center
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This covers all of the crucial aspects of master data in profit center accounting.
5.3.2 Profit Center Master Data Assignment

Monitor and Assignments
Because profit center is a statistical cost object, you need to assign it to a real cost
object so that the posting flows to a profit center. Other than assignment, you do
not need anything else to post data to profit center accounting. The moment you
assign the profit center, the data will come from all over the place.
Note
This assignment is an important event of discovery that allows you to understand how
your organization is split up. It allows you to visualize your organization from the re-
sponsibility perspective at a granular level.
Assignment Monitor allows you to track and manage your assignments of profit
center to other cost objects. The menu path is SAP Menu • Accounting • Enter-
prise Controlling • Profit center accounting • Master data • Current Settings •
Assignment Monitor. The Transaction is 1KE4. Figure 5.54 shows you the Assign-
ment Monitor. You can use this to find the cost centers that are not assigned to
any profit center, cost centers that are assigned to profit centers, and profit centers
that are not assigned to a cost center. You can do a similar exercise for all other
cost objects.
Figure 5.54 Assignment Monitor (1KE4)
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Table 5.4 shows the transaction codes that allow you to assign profit centers to
different cost objects.
Assignment of Profit Center to: Transaction Code

Materials/Fast Assignment S_ALR_87003972
Materials/Master S_ALR_87004117
Sales Order/Substitution S_ALR_87004101
Sales Orders S_ALR_87004092
PP Production Orders S_ALR_87004086
Process Orders S_ALR_87004078
Controlling Production Orders S_ALR_87004070
Cost Objects S_ALR_87004060
Projects S_ALR_87004296
Cost Center S_ALR_87004478
Internal Orders S_ALR_87004473
Maintenance Order S_ALR_87004460
Business Processes S_ALR_87004465
Real Estate Objects S_ALR_87004447
Fixed Assets S_ALR_87004454
Table 5.4 Transaction Codes for Profit Center Assignments
In the next subsection, you will learn about the number ranges and document types
for local documents that need to be created only in profit center accounting.
5.3.3 Number Ranges and Document Types

In this section, you will learn the menu paths and transaction codes for profit
center planning and actual postings that need to be made only in profit center
accounting. Table 5.5 shows you the menu path and transaction codes for creating
number ranges and document types for profit center planning and recording actual
profit center postings that occur only in profit center accounting.
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Area Basic Menu Path Trans.Code

Setting
Profit Center Maintain IMG • Enterprise Controlling • GCBA
Planning document Profit center accounting • Planning
types • Basic Settings for Planning
for local • Maintain Document Types •
documents Maintain Document Types for Local
Documents
Profit Center Maintain IMG • Enterprise Controlling • Profit GCBR
Planning document center accounting • Planning • Basic
types for Settings for Planning • Maintain
rollup Document Types • Maintain
Document Types for Rollup
Profit Center Define IMG • Enterprise Controlling • Profit GB02
Planning number center accounting • Planning • Basic
ranges Settings for Planning • Maintain
for local Document Types • Define number
documents ranges for Local Documents
Profit Center Maintain IMG • Enterprise Controlling • Profit GL20
Planning number center accounting • Planning • Basic
ranges for Settings for Planning • Maintain
rollup Document Types • Maintain number
ranges for Rollup
Profit Center Maintain IMG • Enterprise Controlling • GCBX
Actual document Profit center accounting • Actual
types for Posting • Basic Settings: Actual
actual • Maintain Document Types •
postings Maintain Document Types for Local
Documents
Profit Center Maintain IMG • Enterprise Controlling • Profit GB02
Actual number center accounting • Actual Posting
ranges • Basic Settings: Actual • Maintain
for local Document Types • Maintain number
documents ranges for Local Documents
Table 5.5 Defining Document Types and Number Ranges for Local Postings in Profit Center
Accounting
In the next subsection, we will cover how you can map additional balance
sheet and P&L accounts that cannot be mapped via a cost object to profit center
accounting.
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5.3.4 Choose Additional Balance Sheets and P&L Accounts

The goal for profit center accounting is to map each and every account to a profit
center to be able to generate balance sheets by profit centers. This requires that
balance sheet accounts that do not have a cost object assigned to them, such as
AP, AR, inventory, work in progress, and so on, also require a profit center to be
defaulted to these. Using the configuration settings detailed here, you can maintain
the default profit centers for a range of balance sheet accounts. You can follow the
menu path IMG• Enterprise Controlling • Profit center accounting • Actual Post-
ing • Choose Additional Balance Sheet and P&L account • Choose Accounts. You
can also use Transaction 3KEH.
Figure 5.55 shows you the screen where you can maintain the range of accounts
(Account from) 100000 and (Account to) 20000 and the default profit center (Def.
PrCtr) 10101, which will get populated after you make this entry. This setting
needs to be made for CO Area US01.
Figure 5.55 Choose Accounts
However, as you can see, that this is a very simplistic setting that might not be use-
ful to organizations that have more complex rules for determining the profit center
than just a direct GL assignment. You can use the derivation rules functionality to
map the profit center in much more flexible fashion. The menu path IMG• Enter-
prise Controlling • Profit center accounting • Actual Posting • Choose Addi-
tional Balance Sheet and P&L account • Derivation Rules for Finding the Profit
Center, or use Transaction 3KEI.
Figure 5.56 shows how you can set up default determination for the profit center.
Based on your requirement, you need to identify the Source Fields as “RACCT:
Account Number” and the Target Fields as “PRCTR: profit Center”. If you want,
you can add more source fields to this to make the determination more specific
such as company code, plant, and so on.
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ProfitCenterAccounting 5.3
Figure 5.56 Define a Derivation Rule for Profit Center Determination
After you define the source fields, you can maintain the conditions that must be
fulfilled for the system to determine the profit center on the Condition tab as
shown in Figure 5.57.
Figure 5.57 Define Condition for Derivation Rule
After defining the conditions, you can maintain the Attributes as shown in Figure
5.58 where you can Issue error message if no value found. You can also branch
to additional steps if required.
Figure 5.58 Define Attributes for the Derivation Rule
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After you have set up the derivation rule, you can maintain the rule values by
clicking on Maintain Rule Values button shown in Figure 5.56. This will allow
you to enter the values for the profit center by the source fields as shown in Fig-
ure 5.59.
Figure 5.59 Maintain Rule Values for the Derivation Rule
5.3.5 Period-End Closing

If you have posted actual transactions in profit center accounting or have used
additional accounts defined in Section 5.3.4, you need to carry forward the bal-
ances to the new fiscal year or new period within the same fiscal year. The menu
path is SAP Menu • Accounting• Enterprise Controlling • Profit center account-
ing • Actual Posting • Period End Closing • Balance carryforward. The Transac-
tion is 2KES.
Figure 5.60 shows you the parameters for carrying forward actual balances in
profit center accounting to the new fiscal year. You need to enter the Company
Code and Carry Forward to Fiscal Year and then execute the transaction. This will
carry forward all of the balances to the new fiscal year for the company code.
Figure 5.60 Balance Carryforward
The menu path is SAP Menu • Accounting • Enterprise Controlling • Profit center
accounting • Actual Posting • Period End Closing • Transfer Payables/receiv-
ables, and the Transaction is 1KEK. Except for receivables and payables, all the
transactions in profit center accounting are transferred in real time. However, you
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InternalOrderAccounting 5.4
need to transfer payables and receivables periodically at the end of each period.
This allows you to generate balance sheet on a profit center basis. Figure 5.61
shows you the screen that you can use to carryforward the payables and receiv-
ables to the profit center accounting for a fiscal period. You need to enter the
Period and Fiscal year. The system automatically picks up all the company codes
assigned to the Controlling area. You can choose to transfer all the Line items or
just the balances.
Figure 5.61 Transfer Payables/Receivables
5.4 Internal Order Accounting
Figure 5.62 shows you the process that underpins the discussion in this section.
Internal order accounting is primarily used for managing small projects that need
to be budgeted and managed independently, for example, setting up a marketing
kiosk in a cultural event. “Internal orders” is a general term that can be used for
overhead cost orders, capital investment orders, internal orders with revenues,
accrual orders, and so on. Internal order accounting allows you to plan, collect,
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and settle the costs associated with a mini project in a process-oriented fashion, so
it mimics exactly the way business operates. You can, however, use internal orders
for multiple Controlling-oriented activities as listed here:
EE Orders for transient activities
These are one-off mini projects that are not regular and occur for a limited time-
frame, for example, sales kiosks at a SAP Financials conference.
EE Long-term cost monitoring activities
You can also set up long-term internal orders that occur at regular intervals and
allow you to establish a pattern, such as quarterly maintenance activities.
EE Statistical internal orders
These are not true cost objects, and you cannot settle these to any other cost
object. However, these allow you to track and report specific parameters of
costs recorded. In this case, you need a real cost object, but you can use internal
orders to provide an additional layer of reporting.
Internal Order
Master Data Master
Order Group
Business Order Status

Settlement
Transactions Types Management
Budgeting &
Budget Tolerance
Availability
Profile Limits
Control
Figure 5.62 Internal Order Learning path
5.4.1 Internal Order Master Data

Internal order master data is used to monitor the costs. Following are the types of
internal orders with their business significance:
EE Overhead cost orders used for monitoring overhead costs that are recorded
during internal order execution
EE Investment orders that you know will be later converted to fixed assets
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EE Accrual orders used to track the costs incurred on a periodic basis

EE Orders with revenues used to record revenues in internal orders
Internal Order
In this step, you will learn the key attributes of internal orders and the process of
creating an internal order. The menu path to follow is SAP Menu • Accounting •
Controlling • Internal Orders • Master data • Order manager • Special Functions
• Order • Create/Change/Display, and the Transactions are KO04/KO01/KO02/
KO03. An internal order needs to be created by Controlling area. Figure 5.63

shows you the screen for maintaining internal orders by using an order manager
transaction. To define an internal order, you have to define an Order type. The
figure shows how you can maintain the Assignments along with the Description
General Marketing Campaign.
Figure 5.63 Internal Order: Assignments
In the order manager transaction, you can find your internal orders by maintaining
the Selection Variant in the left pane and maintaining your Personal worklist that
allows you to maintain your own range of internal orders. The various assignments
that can be maintained are Company Code, Business Area, Plant, Functional
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Area, Object Class, Profit Center, WBS Element, Sales Order, Tax Jurisdiction,
and External Order no. Other fields that are not so obvious are explained here:
EE Responsible CCtr (cost center) and Requesting Co. Code
This is integrated with investment management, and the cost center and com-
pany code that you enter here will get transferred to the AuC.
EE Requesting Order
This is the order to which other orders can be assigned.
Figure 5.64 shows you the screen for maintaining the Control data for an internal
order. While you are creating, the internal order, system will automatically set the
System status as CRTD. The system status essentially controls which transactions
are allowed for the internal order.
Note
From SAP ERP 5.0 onward, you can also define your User status, which you can change
as desired.
Figure 5.64 Internal Order: Control Data
In addition, you can maintain the following Control data parameters:

EE Currency
Here you can maintain the currency for the internal order.
EE Order category
This helps you define the technical properties of an order type. You need to pick
an order category that pertains to internal order accounting.
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EE Statistical order
This flag marks the internal order as statistical.
EE Actual posted CCtr
If you mark the cost center as statistical, then you can also specify which cost
center will receive the real postings.
EE Plan-integrated order
This flag is only checked if you are using integrated planning for internal
orders.
EE Revenue postings
This flag controls whether the internal order will allow revenue postings.
Figure 5.65 shows you the screen for maintaining the period-end closing activities.
The following parameters can be maintained in this screen:
EE Results Analysis Key
This is used to define the valuation of the internal order. For sales orders, you
can use results analysis to valuate nonvaluated stock at month end and the
stock that has been delivered but not invoiced yet. For projects, you can use the
results analysis key to valuate work in progress.
EE Costing Sheet and Overhead Key
These can be maintained for calculating the overhead, and the Interest Profile
allows you to define the rules for calculating interest.
Figure 5.65 Internal Order: Period-End Closing
You can also define one receiver for the internal order by identifying the settle-
ment cost element, cost center, and GL account. Figure 5.66 shows you the screen
of general data related to administrative details pertaining to internal orders, such
as estimated costs, processing group, work start, end of work, and so on.
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Figure 5.66 Internal Order: General Data
Figure 5.67 shows you the Investments tab for maintaining the investment-related
data for an investment order.
Using this screen, you can tie the internal order to investment management, which
will be discussed in more detail in Chapter 6. Here you can maintain the follow-
ing parameters:
EE Investment profile
This allows you to automatically create an AuC when creating an internal order and
can help you default the asset class for the AuC and the depreciation simulation.
EE Scale
This can be used to categorize your investments from the amount of capital
required.
EE Investment program/Position ID
This allows you to define the investment program and position ID within the
investment program to which the internal order should be assigned.
You can define the Asset class and Capitalization date for assets that will be cre-
ated from the settlement of this internal order.
Figure 5.67 Internal Order: Investments
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Now that you have learned to define an internal order, you will next learn about
creating an order group.
Create Order Group

Order groups group together similar internal orders that allows you to perform
reporting, settlement, and overhead calculation. The menu path is SAP Menu •
Accounting • Controlling • Internal Orders • Master data • Order Group • Cre-
ate/Change/Display. The Transactions are KOH1/KOH2/KOH3. Figure 5.68 shows
how you can maintain an order group (SALES_MKTG) that has the orders pertain-
ing to SALES and MARKETING. In the Marketing order group, the internal order
100000: General Marketing has been assigned.
Figure 5.68 Create Order Group
5.4.2 Create Order Type

Order types allow you to classify internal orders. This is one of the main configura-
tion activities that you need to make for defining the types of internal orders, and
it ties all the other components of internal order customizing settings together.
Order types define the order category, number range assignments, and control
indicators that allow you to control the partner update, order classification, settle-
ment profile, planning profile, budgeting profile, and status management. You can
follow IMG • Controlling • Internal Orders • Order Master data • Define Order
Types, or use Transaction KOT2_OPA. An alternate menu path is SAP Menu •
Accounting • Controlling • Internal Orders • Master data • Current Settings •
Order Types, or Transaction S_ALR_87005266.
Figure 5.69 shows you the different order types that come predefined in the sys-
tem. You can copy these to create your own order type. The ones that we are more
interested in for internal order accounting range from 0100 to 0400.
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Figure 5.69 Define Order Types
Order types need to be assigned to an order category that allows you to define the
multitude of attributes for an order type. The following order categories can be
defined for an order type that is relevant for internal order accounting:
EE 01 Internal Order (Controlling)
EE 02 Accrual Calculation Order (Controlling)
EE 03 Model Order (Controlling)
If you double-click on order type 0100: Internal orders: Development in Figure
5.69, you can maintain the characteristics of the order type as shown in Figure
5.70. You can maintain the following parameters:
EE Number range interval
Here you can choose the number range by clicking on the pencil icon.
EE Settlement profile
This allows you to define the parameters that can be used for controlling the
settlement process of internal orders. You will learn more about the settlement
process in subsequent sections.
EE Planning profile/Execution profile/Budget profile
This can be used to default the internal order planning, execution services, and
budgeting parameters.
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Figure 5.70 Order Type Configuration Details
EE Object Class
This allows you to classify the cost objects as overhead, production, production,
or profitability.
EE CO Partner Update
This allows you to reduce the number of totals records by setting the indicator
as Semi-active or Not Active.
EE Commit. Management
This flag activates commitment management in Controlling for the internal
order type.
EE Revenue postings
This allows you to post revenues.
EE Integrated planning
This flag activates integrated planning for the order type.
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EE Status Profile
This allows you to choose an appropriate status profile for an order type.
EE Release immediately
If you check this indicator, then the internal order is released automatically.
EE Master data display
If you click on Field selection Change (pencil icon) you will reach the next
screen shown in Figure 5.71. Here you can maintain how the various fields will
look when you are trying to create an internal order. Using this setting, you can
get rid of useless fields and make the most important fields a required entry
(Req. entry).
Figure 5.71 Field Selection by Order Type
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5.4.3 Status Management

An internal order goes through its lifecycle starting from CRTD, which you saw
when you created the internal order. Status management allows you to control how
the status will move from CRTD to other statuses. This allows you to control the
business transactions that are allowed for an internal order at any given moment.
After the order is created, you need to release the internal order for it to start
receiving actual postings. This is done by setting the status as REL. When the order
is in REL status, then most of the business transactions are allowed. After the inter-
nal order is done, you can mark it technically complete (TECO), which means that
now you cannot perform actual postings on the internal order because the order
has been completed. After you have settled the order, then you can mark it as set-
tled and closed (SETC). This prohibits any further postings to the internal order.
You can achieve all this by maintaining the status profile, which allows you to
define a status profile, assign it to a user status, and then control the transactions
based on the user status. As you learned earlier in Section 5.4.2, status profile is
assigned to the order type, which is maintained in the internal order master.
So let’s discuss how to create a status profile. The menu path you can follow is
IMG • Controlling • Internal Orders • Order Master data • Status Management •
Define Status Profiles. The Transaction is OK02. Figure 5.72 shows you the screen
where you can maintain the status profiles. It is best to create your own status pro-
file by copying an existing status profile.
Figure 5.72 Define Status Profile
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If you double-click on Status Profi.. 00000002: Internal Orders, then you will
reach the next screen as shown in Figure 5.73. This has two statuses LKD: Locked
and PLIM: Write Plan Line Items. The following parameters can be maintained:
EE Status
This is the status number that determines the sequence in which user statuses
are determined. The lower the number, the earlier the status gets activated. The
status numbers need to be arranged in an ascending order.
EE Status/Short Text
This is the identifier with the details for the status of the internal order as it
completes its lifecycle.
EE Init. St
If you set this indicator, then the internal order will get created with this status
initially.
EE Lowest
This lowest status number determines the status number that the next status
should have.
EE Highest
This helps you in checking whether the old statuses can be deactivated after
you have moved to a new status number. The system compares the new status
number against the number in the field, and if it is less than that, then it deac-
tivates the previous status.
EE Posit
This identifies the line in which the allowed status will get displayed.
EE Priority
This identifies the status display priority at a particular position.
Figure 5.73 Define Status and Properties of Status
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If you double-click on LKD, you will reach the next screen shown in Figure 5.74.
Figure 5.74 Define Status Profile: Status= Locked
Here you can maintain which Business Transactions do not have any influence
(No influ..), which are Allowed, which will give you a Warning, and which are For-
bidden (Forbidd). So this is essentially the field status group for statuses. However,
you can maintain the following subsequent actions for each business transaction:
EE No acti …
This ensures that the transaction does not have any impact on the status.
EE Set
This ensures that if this transaction is executed on an internal order, then the
corresponding status (LKD, PLIM, etc.) will be set up.
EE Delete
If you indicate this indicator for any business transaction, then the correspond-
ing status to which the business transaction is tied is deleted.
Figure 5.75 shows you the details of the PLIM.
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Figure 5.75 Define Status Profile: Status = Write Plan Line Items
This allows you to configure that if the Release business transaction occurs, then
you can write plan line items because PLIM will become active.
Note
Business transactions are tied to user status, which is tied to status profile, which is tied
to order type, which needs to be maintained in the internal order master.
Now that you understand the integrated master data and business transaction
mapping of internal orders, you will learn about the internal order settlement
process.
5.4.4 Internal Order Settlement Process

The basic purpose of an internal order is to receive the costs during its life and
then pass on these costs to one or more receivers as part of the settlement process.
Fixed assets, cost centers, and profitability segments can be valid receivers for an
internal order settlement. There are two types of settlements that are possible in
an internal order:
EE Settlement to one receiver
This can be a straightforward settlement process based on the master data that
is maintained in the internal order. Note that this functionality was not avail-
able prior to SAP ECC 5.0.
EE Comprehensive settlement
This follows the standard settlement process in which you can settle costs to
multiple receivers with different distribution rules.
In this section, you will also learn to maintain the settlement profiles that are again
assigned to the order type, which is then assigned to the internal order master.
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The menu path is IMG • Accounting • Controlling • Internal Orders • Planning •

Manual Planning • Maintain Settlement • Maintain Settlement Profiles. Figure
5.76 shows you the screen for maintaining the Settlement profile: 50: Investment
measure.
Figure 5.76 Define Settlement Profile
The settlement profile essentially controls the following aspects:

EE Actual Costs/Cost of Sales
You can choose to define whether the settlement needs to be done in full (To
be Settled in Full), or whether the settlement is even allowed (Not for Settle-
ment). Choosing Can Be Settled allows you to settle partially.
EE Default values
You can maintain the default values of the allocation structure, source structure,
profitability transfer structure, and default object type.
EE Valid Receivers
Here you can specify the valid receiving objects that are not allowed and that
are optional.
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EE Other Parameters
Here you can specify the document type, the maximum number of distribu-
tion rules, and the archiving time before you archive the posted settlement
documents.
EE Indicators
This lets you define the various indicators for the settlement profile.
EE 100 %-validation: The system checks whether the cumulative percentage
against all the receivers total to 100 %.
EE % Settlement: This allows you to use percentages in the settlement distribu-
tion rules.
EE Equivalence numbers: You can use equivalence numbers (e.g., 2:3:3) to dis-
tribute the settlement amount to receivers.
EE Amount settlement: This allows you to directly enter amounts to receivers.
EE Variances to Costing-Based PA: This indicator allows you to transfer the vari-
ances to costing-based profitability analysis during the settlement process.
5.4.5 Budgeting and Availability Control in Internal Order Accounting

You learned about the budgeting process in Chapter 4 where we discussed setting
up an original budget and then updating the budget using budget supplements
and returns. This makes up the current budget against which the system will check
whether the actual postings have exceeded the budget. Let’s now move on to
learning about maintaining budget profiles and availability controls.
Maintain Budget Profile

A budget profile allows you to control whether availability control needs to be
active and which budget values need to checked. For internal order accounting, the
budget check happens against the current budget, whereas for PS, the check can be
either against the current or released budget. You can follow IMG • Accounting •
Controlling • Internal Orders • Budgeting and Availability control • Maintain
Budget profiles • Maintain Budget Profile, or use Transaction OKOB.
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Figure 5.77 Maintain Budget Profile for Internal Order
Figure 5.77 shows you the screen for maintaining a budget profile. The following
parameters can be maintained in a budget profile:
EE Time Frame
Here you can maintain the number of years you can go back in the Past and for-
ward in the Future. The field Start allows you to specify how many years from
the current year the budgeting process should start. Total values and Annual
values allow you to plan/budget total and annual values, respectively.
EE Program type budget
This allows you to specify the program position. If you enter a program posi-
tion here, then the internal order need to be assigned to one of the program
positions for it to be relevant for budgeting.
EE Activation Type
This setting forms the core of the availability control by specifying the follow-
ing activation types:
EE 0: Cannot be activated.
EE 1: Automatic activation with budget allocation.
EE 2: Background activation.
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219 Book.indb 185 6/5/08 1:33:15 PM

EE Usage
Here you can enter tolerance in % of Assigned to Budgeted value, which if
exceeded will trigger the automatic background activation if option 1 was
selected as the Activation Type.
EE Overall
This counts the overall budget rather than just the annual values.
EE Object currency
This forces the system to check the budget in the internal order currency.
EE Budgeting currency
You can specify your budgeting currency as the Controlling area currency, object
currency, or transaction currency.
EE Currency Translation: Overall Budget
Here you can maintain the exchange rate type and the value date that will be
used to translate the internal order transactions to compare against the bud-
geted value.
After you have defined the availability control, you need to define the tolerance
limits, which will tell the system what to do in case the budget is exceeded.
Define Tolerance Levels for Availability Control

Tolerance levels allow you to define the system checks that happen when the bud-
get reaches a certain percentage. The menu path is IMG • Accounting • Control-
ling • Internal Orders • Budgeting and Availability control • Define Tolerance
Levels for Availability control. Figure 5.78 shows you the screen for maintaining
the tolerance limits for availability control, which allows you to define the follow-
ing parameters:
EE COAr
This identifies the Controlling area.
EE Prof
This represents the budget profile that was defined in the previous step.
EE Tr. Grp
The ++ signs indicate that all the transaction types are selected for defining the
tolerance limits.
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Summary 5.5
EE Act
This identifies the action that needs to be taken on the basis of the three
parameters:
EE 1: Warning.
EE 2: Warning with mail to responsible person.
EE 3: Error message.
EE Usag.
Here you can specify the tolerance levels, which if crossed, trigger the action
identified in the previous step.
EE Abs. Variance
This allows you to specify the maximum permissible absolute variance beyond
which the action will be triggered regardless of the usage percentage defined
in Usag….
Figure 5.78 Define Tolerance Limits for Availability Control
5.5 Summary
In this chapter, you were introduced to the basic methods of budgeting, such as
cost center budgeting and internal order budgeting. Cost element accounting, cost
center accounting, profit center accounting, and internal order accounting are typi-
cally the Controlling components that are easiest to implement and which also give
you the maximum value out of implementing SAP ERP. This is because you can
tailor your Controlling processes in more detail as you build on these to determine
your optimal Controlling structure.
In this chapter you also learned about setting up primary and secondary cost ele-
ments and cost element groups in cost element accounting. Then you were intro-
duced to cost centers, cost center groups, cost center standard hierarchies, activity
187
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types and groups, statistical key figures, and groups and resources definition. These
form the basis of performing cost center planning manually, and were followed
by a detailed explanation of the resource planning concept in cost center account-
ing. These planning tools will get you rolling quickly to get your planning process
ironed out. The various features and functionalities that make your planning exer-
cise faster and more customized to your needs were also discussed.
From learning about budgeting in cost center accounting to learning about cost
center planning and implementing funds commitment, you gained an understand-
ing of capturing future funds being locked up, providing you with an overall com-
mitment exposure for your organization.
You also learned about the overhead costing sheets that can be set up in cost cen-
ter accounting to calculate the cost of goods manufactured. Cost center accounting
was followed by profit center accounting where you learned about profit center,
profit center group, and the assignment of profit centers to other cost objects. You
also learned about some of the key settings that allow you to create a balance sheet
by profit centers. We then proceeded to key period-end and fiscal year-end closing
activities for profit center accounting.
Internal order accounting allows you to track short-term projects that need to be
capitalized or transferred to other cost objects. You learned about the internal
order master and internal order group. This was followed by an explanation of
order types and how this relates to status management and the settlement process
in internal order accounting. Finally you learned about activating budgeting and
availability control.
In Chapter 6, you will learn about budgeting using investment management.
188
ch05_5132.indd 188 6/5/08 4:23:53 PM

Index
A Asset accounting, 100, 247, 414

Asset Balances, 414
Account assignment, 109 Asset under construction (AuC), 96
assignment derivation, 259 Assign budget profile to program type, 207
Default, 116 Assign investment profile to model order,
Account Balances, 408 216, 217
Account based CO-PA, 369 Assignment Monitor, 163
Account determination Assignment of organizational entity, 66
Extended, 113, 114 Assignment/RA key, 334
Accounting Assign operative objects to program type, 198
Cost center, 20, 80 Assign orders to the position, 205
Cost element, 20, 80 Attribute mix, 122
Accounting and audit perspective, 46 Auditor and regulator, 51
Accounts Receivable, 409 Authorization group, 239
Activate Automatic posting, 116
account assignment elements, 227 Availability control, 186, 224
actual cost component split, 362 Availability control ledger, 280
functions, 229
multiyear budget execution, 232
Activity group, 277 B
Activity type, 132
Group, 133 Balance carryforward, 168
Actual/Actual Comparison, 419, 422 Balanced entry, 262
Actual costing, 347 Balance sheet
Actual costing/material ledger, 302, 303, 347, Additional, 166
429 Bank Accounting, 413
Actual costing/material ledger information Base object cost estimate, 311
system, 429 Best Practice, 67, 71, 72, 74, 75
Advantages of one global operating concern, Best Practices Installation Assistant, 42
72 Bill of Exchange Accounting, 413
Advantages of regional operating concern, 72 Budget
Allocation cycle , 134 Integration, 106
Alternative hierarchy, 239 carryforward, 297
Application of funds, 249 Control System (BCS), 224
Appropriation requests, 208 entry document, 267
Architecture of drilldown reporting, 437 planning, 224
ASAP methodology, 33 profile, 145, 233
ASAP phases of an SAP implementation, 33 profile , 184
Assessment, 156 structure, 224
Asset, 96 type, 265
457
219 Book.indb 457 6/5/08 1:34:55 PM

Index
Budgeting, Availability control, 225 Multiple, 67

Building blocks Company code to Controlling area
Concept, 42 (N1 or 11), 66
Business area, 116 Compensation management, 105, 106
Business Blueprint, 34, 71 Configure dynamic price change, 354
Business configuration set, 44 Configure the output type, 441
Business Information Warehouse, 105 Consolidation, 431
Business manager, 51 Consolidation Information System, 432
Business processes Controlling, 49, 79, 247
Order to cash, 18 Actual cost, 92
Procure to pay, 18 Assignment, 96
Business requirements, 50 Basic concepts, 87
Business transactions, 388 Business structure , 136
Collecting cost, 90
Commitments management, 89
C Component, 80
Default account assignments, 107, 116
Capital budgeting, 191 Document, 85, 342
Carryforward budget and commitments for Enterprise, 65
orders and projects, 220 Functions, 20
Carryforward budget of old investment Integration with Finance, 81
program, 220 Integration with nonfinancial components,
Carryover, 262 81
Cash application, 101 Internal, 125
Changes in values, 431 Level, 361
Characteristics, 378 Map to HR structure, 104
Defining new, 379 Object, 88
Hierarchy, 383 Payroll integration, 103
Typical, 378 Profitability Analysis (CO-PA), 368
Value, 382 Profit center, 65
Check writing, 90 Settlement, 90
Choose accounts, 166 Without real-time integration, 115
Choosing the optimal Controlling enterprise Controlling area, 64, 82, 135
structure, 61 Creation, 83
Close old approval year, 221 Parameters, 83
Closing open items, 297 Valid fiscal year, 84
Closing operations, 224, 225 Controlling area and operating concern
Commitment, 147 (11/N1), 68
Management, 89 Controlling area currency, 72, 316
Commitment carryforward, 297 Controlling area to operating concern
Commitment item, 236, 238 (N1 or 11), 68
In Controlling, 92 Controlling component (CO) reporting, 417
Commitment processor, 107 Controlling-Investment Management (CO-IM),
Commitments 100, 192
Activation, 148 Controlling objects
Company code Account assignment, 87
Definition, 66 Controlling organizational entity, 62
458
219 Book.indb 458 6/5/08 1:34:55 PM

Index
Controlling Overhead Cost Management Costing

(CO-OM), 100 Actual, 301, 359
Controlling-Profitability Analysis CO-PA, 63 Aspect, 302
Custom characteristics, 382 run, 317
Enterprise structure, 372 sequence, 305
Integrated view, 371 sheet, 143, 144, 153
Tables, 375 Costing based CO-PA, 368
Corporate governance, 55 Costing estimate
Cost Preliminary, 326
Actual, 326 Costing variant, 137, 138, 311, 326
Additive, 309, 315 Defining, 328
Analysis, 302, 303 Parameters, 312
Breakdown, 304 Cost object, 92, 342
Comparision, 304 Hierarchy, 325
Estimate, 318 Cost object controlling, 301, 302, 303,
Modified estimate, 306 321
Of goods manufactured, 304 Capabilities, 321
Reasons for increase, 307 Components, 322
Target, 345 Functions, 321
Work in process, 326 Integration, 323
Cost accounting, 416 Transient, 90
Cost center, 64, 127, 128 Cost planning, 94
Allocation, 103 Easy, 94
Budget planning, 145 Manual, 94
center group, 130 Network, 94
center planning, 136 for Intangible Goods and Services, 322
Cost center accounting, 119, 125, 145, 418 Create and Generate Form, 440
Default account assignment, 116 Create
Integration with MM, 103 dummy profit center, 162
Cost Center Accounting Information System, fund, 247
420 fund group, 248
Cost centers standard hierarchy definition investment program position, 200
By department or by division, 74 profit center group, 161
Cost components, 307 report with Report Painter, 437
split, 350, 361, 362 investment program definition, 199
structure, 307 positions within the investment program,
view, 308 206
Cost element, 121, 307 Cross application tool, 28
Category, 122 Cross company costing, 316
group, 123 Currencies in Controlling, 72
Primary and secondary, 122 Currency, 95, 351
Secondary, 109 Type, 95
structure, 123 User-definable, 95
Cost element accounting, 119, 120, 418 Current Settings, 430
Cost estimate Customer Balances, 409
Inventory, 320 Customer Line Items, 409
Standard, 319
459
219 Book.indb 459 6/5/08 1:34:55 PM

Index
D Evolution from ASAP to ValueSAP to Solution

Manager, 32
Day-to-Day Activities, 416 Exchange rate difference, 347
Define Execution service, 94
a new variant, 434 Explanations for P&L, 414
characteristic values in columns, 439
characteristic values in rows, 439
costing sheet, 154 F
costing variant, 137
funds management fund type, 249 Field selection string , 150
material ledger type, 352 Field status group, 150
new material ledger type, 352 Defining , 151
order type, 176 Field status string
program type, 196 Assign , 153
Report, 430 Field status variant, 150
settlement profile, 183 Final Preparation, 34
status profile, 260 Finance document, 110
tolerance profile, 279 Financial Accounting, 55, 65, 341
value fields, 398 Requirements, 338
Deletion allowed, 334 reporting, 407
Depreciation forecast, 416 Financial Analytics, 56
Detailed Reports, 427, 429 Financial and Management Reporting, 406
For Base Planning Object, 426 Financial information user, 52
For Material, 426 Financial operations, 52
For Sales Order Cost Estimate and Order Financial Planning, Budgeting, and
BOM Cost Estimate, 426 Forecasting, 406
Display Line Item List, 430 Financial statements (Balance Sheet, Cash
Distribution, 157, 262 Flow Statements and Profit), 407, 433
Document, 408 Financial Supply Chain Management (FSCM),
Document display, 418 53, 55
Document type, 164 Fiscal year
Document types New, 157
For funds commitment, 149 Fiscal year change for Investment
Drilldown reporting in SAP ERP Financials, Management, 218
436 Fiscal year variant, 67, 233
Dummy profit center, 162 FMSA, 241
Former budgeting, 224
Functional area, 122, 253
E Fund, 227, 246
Fund balance carryforward, 297
eCATT procedure, 43 Funded program, 250
Enhancing an existing SAP ERP Fund profile, 233
implementation, 29 Funds center, 241
Enterprise Service Repository, 27 Funds commitment, 119, 147
Equipment master, 100 Document, 149
Evaluation, 412 Funds Management, 89, 100, 107, 223, 224
An introduction, 224
460
219 Book.indb 460 6/5/08 1:34:55 PM

Index
Availability control (AVC), 274 Interactive Reporting, 423

Basic settings, 225, 227 Internal order, 118, 171
Budgeting, 261 accounting, 119, 169, 421
Closing operations, 295 lifecycle, 119
Integration/actual and commitment settlement process, 182
update, 287 Internal Order Information System, 421,
Master data, 235 422
Optimizing public sector budgeting, 223 Inventory costing needs, 347
Process, 224 Inventory requirement, 306
Further Reporting Functions, 431 Investment Management, 192
Investment profile, 214
Investment program, 194
G Master data, 195
Budgeting, 206
General ledger (GL), 407 Investment program budget
Account, 109 carryforward, 221
Financials, 103 Invoice
New, 81, 107 Creation, 91
Account, 339 verification, 91
Accounts, 369
General Ledger Information System, 408
Generate line items, 334 K
Global enterprise structure, 118
Global functions for BCS, 230 Key Controlling mapping decisions and best
Go-Live & Support, 34 practices, 71
Goods receipt, 91 Key requirements for the SAP ERP Financials
Grants management, 225 solution, 49
H L
HCM Payroll Ledger
Integration with Controlling, 103 Reconciliation, 107
Hierarchy variant, 243 Legacy data transfer, 334
History, 417 Line Item Reports, 424
How this book is organized, 18 Line Items, 408, 420, 422, 428
Human resources, 247 List-Oriented Reports, 423
Long-term cost monitoring activities, 170
I
M
IBM Websphere, 27
Implementation, 37 Maintain Table TVARC with appropriate
Individual Asset, 414 variables, 435
Inheritance principal, 69 Maintenance order, 98
Integration perspective, 46 Management accounting, 55
461
219 Book.indb 461 6/5/08 1:34:55 PM

Index
Management reporting, 79 Object currency, 72

Structure and setup, 118 Object list, 427, 429
Improving, 81 Object list for base planning object, 425
perspective, 45 Object list For material, 425
Margin analysis, 101 Objects
Structuring, 102 Statistical controlling, 88
Master data, 225, 409, 411 True controlling, 88
Cost element, 120 One Controlling area versus multiple
Internal order, 170 controlling areas by region, 73
Objects relevant for Plant Maintenance, 97 One operating concern versus multiple
Profit center, 160, 163 operating concerns by region, 71
Master Data Indexes, 418, 420, 422 Open a new approval year for the investment
Material ledger, 347, 353, 356, 362 program, 218, 219
Activation, 350 Operating concern, 62, 68, 372, 375
Configuration, 350 Maintaining attributes, 372
document, 353 Maintaining characteristics, 378
Material master, 137, 317, 343, 363 Profitability segment characteristics, 373
Price update, 317 Defining, 372
View, 317 Operations, 37
Materials Management Optimization, 38
Integration with general ledger, 103 Orders for transient activity, 170
Materials requirement planning, 93 Order type, 100
Material update structure, 356, 358, 359 Organization management, 104
Message type, 319 Organization units assignment, 202
Microsoft .NET, 27 Overhead cost and ABC analytics, 406
More Reports, 421, 423, 427, 430 Overview, 418
Movement type, 357
Movement type group, 357
P
N Payment advice notes, 413
Payment behavior analytics, 406
New GL Payroll, 105
Allocation functions, 110 Personnel cost plan, 105
Integration with Controlling, 110 Period-end closing, 168
New implementation, 31 Personnel administration, 105
Notes to financial statements, 414 Personnel budget plan management, 107
Number range, 164, 269 Personnel cost plan, 104, 105, 106
Process flow, 105
Plan/actual comparisons, 418, 421
O Plan costs/preliminary cost estimate, 337
Planning reports, 419, 422
Object comparisons, 427 Plant maintenance
Object comparisons for material, 427 Activities, 98
Object Comparisons for unit cost estimate, Order, 98
427 Order lifecycle, 98
462
219 Book.indb 462 6/5/08 1:34:55 PM

Index
Plant notifications, 98 Project preparation, 34

Plan values , 136 PSM-FM, 223
Position budgeting and control, 106 Purchase requisition, 90, 92
Procurement process, 90
Preferred roadmap, 28
Preparation for closing, 416 Q
Price change, 354
Price difference, 347 Quantity structure, 360
Price floor, 301
Prices, 420
Primary cost elements, 121
R
Procurement
Actuals flow, 92 Realization, 34
Product and service cost analytics, 406 Reconciliation document
Product cost by order, 322 Controlling-Financials, 113
Product cost by period, 322, 325 Reconciliation ledger
Product cost by period, by order, and by Activation, 108
sales order, 427 Functions, 108
Product cost by sales order, 322 Structure, 108
Product cost collector, 326 Relationship of company code and Controlling
Product cost controlling, 301, 305 area, 67
Key components, 302 Reporting
Product costing, 80, 301, 324 Controlling, 80
By period, 325 External, 367
Product costing by period and by sales order, For internal purposes, 158
428 Management, 62
Product cost planning, 302, 303, 326, 425 Reporting in Financials and Controlling, 403
Component, 306 Reporting in SAP ERP Financials and
Implementation rationale, 304 Controlling, 404
Integration, 304 Requisition
Production order, 343 Purchase, 91
Production planning, 103 Resource planning, 139
Master data, 303 Resources, 135
Production support, 29 Results analysis, 87
Production variance, 399 Results of the opening of the new fiscal year,
Profitability analysis, 101, 102, 372, 406 219
Optimization, 367 Revenue budgeting, 191
Type, 368 Roadmap, 26
Profitability analysis, 430 Role of SAP ERP Controlling consultants in
Master data components, 373 SAP ERP implementation, 44
Profit center, 65, 88, 161
Hierarchies, 74, 119
Profit center accounting, 118, 119, 158, 159,
341, 370, 423
S
Process, 159 Sales and Operation Planning (SOP), 103
reporting, 424 Sales inquiry , 101
463
219 Book.indb 463 6/5/08 1:34:55 PM

Index
Sales quantity, 103 Senior management, 50

SAP Advanced Planning and Optimization Settlement process, 90
(APO), 93 Shared services, 52
SAP BI Accelerator, 27 Shareholder, 51
SAP CRM (Customer Relationship Shop floor control, 93
Management), 27 Solution Manager
SAP Easy Access Managing SAP implementation, 35
Interface, 56 Solution Manager and interaction with
SAP Easy Access for SAP ERP Financials - helpdesk, 38
Controlling components, 56 Solution Manager process, 36
SAP ERP, 27, 49 Special Functions, 425
Architecture, 19 Specific Valuations, 416
As an integrated application, 101 Specify characteristic values, 440
Budgeting tools, 192 Specify report options, 442
Core organization structure, 62 Speed up the data transfer, 391
Enterprise structure, 20, 61 Split creation/usage, 334
Organizational structure, 61 Stakeholders for finance, 50
5.0 , 79 Standard cost estimate, 337
2005, ECC version 6.0, 17 Standard hierarchy versus alternative
Controlling roadmap, 58 hierarchy, 70
SAP ERP Financials, 20 Standard price , 303
A snapshot view, 54 Standard Reports, 431
History, 52 Standard system, 356
Need for optimization, 18 Statistical cost objects, 88
Solution stack, 54 Statistical internal orders, 170
SAP ERP Financials direction Statistical key figure, 134
A historical perspective, 52 Defining , 134
reports, 407 Group, 134
solution stack,54 Status control, 335
implementation, 25 Status management, 179, 260
implementation reasons, 25 Status profile, 233
landscape, 27 Subdivision ID, 254
solution landscape, 27 Summarization Analysis, 425, 427
Solution Map, 405 Summarization Reports, 423
solution stack, 28 Summary, 47, 60, 75, 443
SAP executive search, 27 Supplement, 262
SAP implementation methodology, 32 Supply chain
SAP Plant Maintenance (PM), 97 Planning process, 93
SAP PLM (Product Lifecycle Management), 27
SAP Project Systems (PS), 93
SAP R/3 T
Financials system, 52
SAP Sales and Distribution (SD) , 101 Target/actual comparison, 419
SAP SRM (Supplier Relationship Target cost, 336
Management), 27 Taxes, 416
SAP Supply Chain Management (SCM), 27, 93 Time dependency of enterprise organizations,
Sarbanes-Oxley Act, 53 71
464
219 Book.indb 464 6/5/08 1:34:55 PM

Index
Tip, 412 Value fields, 379

Tolerance limits, 186 Key characteristics, 379
Tolerance profile, 278 ValueSAP implementation approach, 35
Tools, 409, 410, 411, 417 Variables in reporting, 435
Training and Event Management, 105 Variance
Transaction currency, 73 Calculation data, 87, 342
Transfer, 262 key, 343
Transfer control, 328 Variant, 111, 432
Transfer document, 115 Define for real-time integration, 111
Types of SAP implementation, 29 Variants and variables in reporting, 432
Vendor balances, 410
Vendor items, 411
U
Unit product, 301 W
Update plan values, 335
Update/RA key, 334 Working capital and cash flow management,
Upgrading SAP ERP to a new version, 30 406
User experience, 27 Work in process, 341
Using SAP Best Practices solution, 40
Y
V
Year-dependent master data, 235
Valuation
area, 116
method, 336
variant, 137, 144
465
219 Book.indb 465 6/5/08 1:34:55 PM

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Optimize Your SAP ERP Financials

219 Book.indb 3 6/5/08 1:32:17 PM

PART II Basic Controlling Processes

PART III Budgeting

PART IV Product Costing

ch00_FM_5132.indd 5 6/5/08 5:14:06 PM

1 SAP ERP Implementation ........................................................... 25

1.1 Reasons for Implementing SAP ERP .............................................. 25

2 Controlling: An Introduction ..................................................... 49

ch00_FM_5132.indd 7 6/5/08 1:56:15 PM

2.4 SAP ERP Controlling Roadmap ....................................................... 58

3 Choosing the Optimal Controlling Enterprise Structure ............ 61

3.1 Controlling Organizational Entities ................................................ 62

PART II Basic Controlling Processes

4 Controlling Business View ......................................................... 79

4.1 Layers of Controlling Reporting ...................................................... 80

ch00_FM_5132.indd 8 6/5/08 1:56:15 PM

4.3.2 Commitments Management in Controlling .......................... 89

5 Optimizing Cost Element Accounting, Cost Center Accounting,

5.1 Cost Element Accounting .............................................................. 120

ch00_FM_5132.indd 9 6/5/08 1:56:15 PM

5.2.6 Overhead Costing Sheets .................................................... 153

PART III Budgeting

6 Optimizing Capital Budgeting Using Investment Management 191

6.1 Investment Management .............................................................. 192

ch00_FM_5132.indd 10 6/5/08 1:56:15 PM

6.2.4 Close Old Approval Year ..................................................... 221

7 Using Funds Management to Optimize Public Sector

7.1 Funds Management: An Introduction ........................................... 224

ch00_FM_5132.indd 11 6/5/08 1:56:15 PM

7.5.4 Availability Control Ledger ................................................. 280

PART IV Product Costing

8 Optimizing Product Costing Decisions using Product Cost

8.1 Product Cost Controlling: An Introduction .................................... 301

ch00_FM_5132.indd 12 6/5/08 1:56:16 PM

9 Optimizing Proﬁtability Reporting Using

9.1 Proﬁtability Analysis: An Introduction ........................................... 368

10 Reporting in Financials and Controlling .................................... 403

10.1 Reporting in SAP ERP Financials and Controlling ........................... 404

ch00_FM_5132.indd 13 6/5/08 1:56:16 PM

11 Concluding Remarks .................................................................. 445

Appendices ...................................................................................... 447

A Glossary and SAP Abbreviations ............................................................. 449

Index ............................................................................................................. 457

ch00_FM_5132.indd 14 6/5/08 1:56:16 PM

5 Optimizing Cost Element Accounting,

Internal order lifecycle from creation to settlement is discussed from a functional

219 Book.indb 119 6/5/08 1:32:45 PM

your internal order lifecycle per your organization’s requirements. In addition,

Master Data Planning Budgeting

Figure 5.1 Basic Controlling Processes

5.1 Cost Element Accounting

219 Book.indb 120 6/5/08 1:32:45 PM

5.1.1 Types of Cost Elements

Figure 5.2 Changing a Cost Element

219 Book.indb 121 6/5/08 1:32:46 PM

The other options seen on this screen are described here:

Figure 5.3 Defining Indicators

219 Book.indb 122 6/5/08 1:32:46 PM