SAP Controlling FAQ

CONTROLLING

Controlling: Controlling provides you with information for management decision-making. If facilitates co-ordination, monitoring and optimization of all process in an organization.

Features of Controlling: Cost Center Accounting, Activity Based Accounting, Internal Orders, Product Costing, & Profitability Analysis.

Controlling Area: Organization unit that represents a closed system Used for accounting purposes.

You can assign one or more company codes to one controlling area.

If you assign more than one company code to one controlling area, then you need to note the following.

1) Consistent Chart of a/c’s (Treat each cost element in all company codes in same way).
2) The Operative fiscal year variants in the company codes must match the fiscal year variant in controlling area.
3) You should execute period end closing in controlling for all company codes at same time.
4) The system only post reconciliation posting across company codes without taxes, which means that it cannot automatically create invoice.
5) Maintain controlling area - OKKP .
6) Maintain no. ranges for controlling documents - KANK
7) Maintain versions - OKEQ

COST ELEMENT ACCOUNTING

Cost Elements: Cost Elements Describe the origin of costs. Cost element classifies the organization valuated consumption of production factors within a controlling area.

Primary Cost Elements: These arise through the consumption of productions factors that are sourced externally. Primary cost elements are used for direct posting and must be accompanied in GL a/c’s in FI.

T-code : KA02 : The categories are follows 1) General primary cost element, 03 - Imputed cost element percentage method 4 - Imputed cost element, target = Actual Method, 11- Revenue elements, & 12 - sales deductions.

Secondary Cost Elements: Cost elements arise through the consumption of production factor’s that are provided internally i.e., by enterprise itself. Secondary cost elements are used strictly for internal controlling posting like assessments and settlements. T-code - ka06

Category: 12 - internal settlements, 31 - Result analyses, 41 - overhead’s, 42 - assessments etc. Cost Element Group - kah1

COST CENTER’S

Cost Center’s: Organizational Unit within a controlling area that represents a defined location of cost incurrence. The definition can be based on 1) Functional Requirement, 2) Allocation criteria, 3) Physical location and 4) Responsibilities for cost.

Change Cost center hierarchy - OKEON
Creation of Cost Center - KS01

Distribution: Was created to transfer primary costs from a sender cost center to receiving controlling objects. Distribution is primary cost elements.
Define Distribution - KSV1
Execute “” - KSV5

Assessment: Was created to transfer primary and secondary costs from a sender cost center to receiving controlling objects.
During assessment, the original cost elements are summarized into assessment cost elements (secondary cost element, category=42).

Define Assessment - KSU1
Execute Assessment - KSU5

Activity Types: Categorizes productions and services activities provided by a cost center to the organization and used for allocating costs for internal activities to the originates of the costs.

Creation of Allocation Cost elements - KA06
Creating/Maintaining the Activity types - KL01

Statistical key figures: Are used as the basis (tracing factor) on which to make allocations (assessments & distributions) and to analyze structural key figures.

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Difference Between Primary and Secondary Cost Element | Travel Expense | Booking | Examples | Operational Costs

Explain the difference between primary and secondary cost element? With an example.

Primary cost elements are like materail costs, personnel costs, energy costs... where a corresponding GL account exists in FI..to allow costs to flow...

Secondary cost elements are like production costs, material overheads, production overheads, they can be created and administered in only CO. These are used in internal cost allocation, overhead calculation, settlement transactions., it does not flow to FI...

General - Cost Element
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Basically, cost element are carriers of costs.

Primary Cost Element
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When cost element carriers cost between FI and CO they are called Primary, the link is established GL A/c = Cost element(Primary). A question may arise as to whether all GL accounts are cost element, it again depends upon the business requirement, where COPA is active then revenue account (GL) are also cost elements, where COPA is not active then revenue account (GL) should not be made as an cost element.

Example....
Again cost of goods sold particularly in VAX (make to stock) is not an cost element, where the same COGS in VAY (make to order) is a cost element. Price Difference account should not be made as cost element.

Entry while booking expenses
Travel Expenses A/c - with Cost Centre Dr. Rs.YY
(will be a GL A/c and cost element) - entries flows to CO thru FI
To Cash A/c Cr. Rs.YY

Secondary Cost Element
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When cost element carries cost with in CO, then they are called secondary cost element.

Example.... - Take Product Costing
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On manufacture of the goods the cost of the above product (production order) is arrived at accumulating material cost + operational cost + overheads (%), additive cost if any.

The cost of operation is accumulated in cost centre be it production / production service / service cost centres, while booking FI entries.

Those operational cost has to be allocated to production order based on operational activities carried on and its cost involved in it. Those operation activities in CO are termed as activity types and has to link the same in KP26 with rates and cost centre (ie., sender cost centre and receiver production order).

In order to find the production order cost, the allocation of cost from sender cost centre to production order for the operational activities carried on and its cost associated with it, have to be loaded, hence in CO the cost centre allocate that portion of operational cost to production order, and this cost is carried by a cost element (since there are no FI involvement and entries are flowing within CO by crediting sender cost centre and debiting receiver production order a cost element has to be created.... say "Operational Cost - Activity" the entry will be

Operational Cost - Activity (Production Order) Dr Rs.XX
To Operational Cost - Activity (Cost Centre) Cr Rs.XX
The entries are with in CO. And the cost element created is secondary since it does not has an link with GL Account in FI correspondingly.

In CO the production order and cost centre are co object including but not limited to.

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Requires an Assignment to a CO Object | Diagnosis |

The first time Account 820290 was only created in FI as a primary expense. After that this account was created in CO too as a secondary expense and any posting will appear an error: Account 820290 requires an assignment to a CO object

Question : How to correct this account back to FI only and not to appear in co?

Note :
Account 820290 requires an assignment to a CO object
Message no. KI 235

Diagnosis
You have not defined a CO account assignment for an account that is relevant to cost accounting.

System Response
Account 820290 is defined as a cost element.
This means that you must always specify a CO account assignment.

Procedure
Enter one of the following CO account assignments

Order
Cost center / cost center/ activity type
Sales order item (for a project or cost relevant)
Project / WBS element
Cost object (Process manufacturing)
Network/ Network activities
Business process
Profitability segment
Real estate object
The posting row affected is 000, account 820290.


First, if G/L account was created in FI, you can only create primary cost element in CO.

Secondary cost element can only be created if no account exists in FI.

Second, if you created the primary or secondary cost element in CO, you have to assign CO account assignment.

You can delete cost element in CO (KO04) if dependent objects found.

Third, when you create cost element in CO, documents would be also created in ‘Cost center accounting’ and ‘Profit center accounting’ when posing in FI. If no cost element exists in CO, no related documents would be created in CCA and PCA.

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Difference between Cost Centers and Internal Orders

A cost center as you will know is for fixed reporting for a long time span as part of your company structure (cost center usually = department or work center).

An internal order is used to accumulate cost for a specific project or task for a specific time period. An internal order is therefore used for a short period with a specific deadline.

Your internal order will usually settle to cost centers (and not visa versa) according to the settlement rule in the order setup.

An internal order can therefore be used to group all the expenses incurred to plan and hold a conference over a 3 month period. The order can be settled on a monthly basis to cost centers.

When the conference is finished the order can be settled finally. The cost of the conference will then be spread over 2 or more cost centers, but can be viewed in total on the internal order when needed.

It is important to understand the difference between a settlement and an assessment cycle. An assessment cycle distributes costs from one cost center to various other cost centers. You cannot assess from a cost center to an internal order nor visa versa. Assessment cycles are only between cost centers.

Settlements are used for orders. In the setup of each order is a "settlement rule". In this settlement rule you tell the system to which cost centers the cost in the order must be settled.
Typically, you will execute the following procedure at month-ends:
1. Settle all orders - this will settle all costs on orders to cost centers.
2. Run assessment cycles - Now that you have al costs against cost centers from your orders, you can start distributing costs between cost centers with assessments.

Costs are posted to an order. When you process a purchase order you post to the internal order and not to a cost center. The same applies to journals in FI. You will post the costs to the order and not to a cost center. You will then settle the order on month-ends to post to the relevant cost centers. It is very important to settle these orders otherwise FI and CO will not
balance on your system.

Internal orders can also be used as "statistical" orders. This is also specified in the setup of the order. You do not have to settle statistical orders. When posting costs, you will post to the cost center and the order simultaneously. Both have to be specified when posting journals or purchase orders against statistical orders.

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Simple Overview of Product Costing | SAP FICO

SAP Product Costing deals with Plan Costing + Actual Costing of Finish products or Services.

CO comprises Product Costing + cost accounting integrated with FI.

It uses Integrated Cost Accounting.

Product costing also has 2 phases depending on the Mfg Scenarios. If you are a normal mfg comp, making goods to stock & sale, you have to first do planning of the costs of products initilally as a STD COST of a product. This is used in many phases in SAP CO acounting. In simple terms, you cost a product by different methods depending on different LIFE CYCLE phases of product. These are Development of new product. Growth stage by modifying it. Mature stage (mass prod). Decline Retirement of that product from Mfg+Mktng)

The whole CO process starts with this PLANNED costs of products & ends with totalling the STD Costs for Actual Production.

This is a simple Std cost Accounting system, in which the end result is calculating Variance bet Planned & Actual & analysing those for further corrective actions.

Product costing is well integrated to FI, but only where overhead cost accounting is used. Otherwise normally it used only for settlement.

All these actual costs of Prod are finally settled/offset to FI or Profitability segments.

SAP CO is a very vast & complicated module of all. It needs deep understanding of the subject.

This give you an overview glimpse of SAP CO.

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Message Control and Control Keys in SAP QM

This key determines which conditions are valid for quality management in procurement.

If you activate the indicator for QM in procurement in the material master record at the client level , you must also store a control key at the plant level for quality management in procurement.

Depending on the control indicators in the control key, you may have to maintain additional data.

SAP transaction code to maintain the Control key SM30 - V_TQ08

You can set the Message Control for Lock as :

I - Information
W - Warming
E - Defects

You can also indicate that a Quality Certificate is required or not.

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SAP Quality Management: Introducing QM in Procurement

The QM component is integrated in crucial phases of the procurement process. It supports the procurement activities by means of functions such as:

* Vendor Evaluation
* Vendor block
* Vendor Release for requests for quotation and purchase orders
* Assigning technical delivery terms and Quality(QM) assurance agreements
* Certificate processing
* Status administration of the supply relationships
* Incoming inspections
* Goods(items) receipt inspections


If your company purchases materials from external vendors, you can implement the QM in Procurement (QM-PT-RP-PRC) component to support your procurement processes for Quality(QM) assurance purposes.

If you want to implement the QM in Procurement component, your company must also use the Purchasing (MM-PUR) component. If you require functions for processing goods(items) movements, you must also install the Inventory Management (MM-IM) component.

You can implement the QM in Procurement component as a stand-alone component or together with the Quality(QM) Inspection (QM-IM) component. As a stand-alone component, you can use all procurement functions except those for processing goods(items) receipt inspections. To process such inspections, you need the Quality(QM) Inspection component.

Using the functions of the QM in Procurement component, you can:

* Manage Quality(QM) -related information for materials, vendors, and manufacturers in Quality(QM) info records
* Release or block vendors and manufacturers
* Monitor the QM systems of vendors and manufacturers
* Supply Quality(QM) documents with requests for quotations and purchase orders
* Evaluate vendors on the basis of Quality(QM)
* Certify vendors or manufacturers that have QM systems implemented, to reduce the inspection requirement
* Manage and release supply relationships
* Request that Quality(QM) certificates be submitted with the delivered goods(items) and monitor the receipt of these certificates
* Inspect vendor goods(items) at vendor sites (source inspections)
* Inspect vendor goods(items) upon receipt (goods(items) receipt inspections)
* Manage the posted goods(items) in inspection stock
* Block the payment of invoices until the goods(items) have been inspected and accepted
* Process goods(items) receipt inspections for manufacturer-specific materials
* Inspect goods(items) that have been externally processed when they are returned in a goods(items) receipt.

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