Question

These questions are from my SAP assignment of Cost Accounting class. Please answer them accurately.

Essay 1

What are the main differences between the Controlling and Financial Accounting modules within SAP?

Essay 2

What prerequisites have to be met in order to set up a Primary Cost Element in Controlling?

Essay 3

Describe the difference between a Primary and Secondary Cost Element.

Essay 4

What information has to be in common between a Controlling Area and a Company Code?

Answer 1

1. SAP FI enables companies to generate financial statements -- such as balance sheets or profit and loss statements -- for reporting and analysis. SAP FI consists of several sub-modules that handle specific accounting processes like General Ledger, Accounts Receivable, Accounts Payable, Asset Accounting.

While SAP FI deals with a company's accounting and internal and external reporting, SAP CO supports processes to plan, report on, and monitor costs from business operations. SAP CO can be instrumental in improving the company's profitability. Like SAP FI, SAP CO is comprised of sub-modules that handle specific processes like Cost elements, Cost centers, Profit centers, Internal order.

2. When creating a primary cost element or revenue element, it must be listed first as a G/L account in the chart of accounts and defined as an account in Financial Accounting. In other words, primary cost elements and revenue cost elements require counterparts in FI. When you create a primary cost/revenue element, the SAP System checks whether a corresponding account exists in FI.

3. Primary Cost Elements in SAP are created to match the General ledger accounts of profit and loss statements in FI. These primary cost elements carry expenses from the SAP-FI module to the Controlling module. Each general ledger account in a profit and loss statement is created as a primary cost element in SAP CO Module to have a proper reconciliation between SAP FI and CO.

Primary cost element categories are Primary Costs, Revenues, Sales Deduction, External Settlement, Accrual/deferral per surcharge, Accrual/deferral per debit=actual.

Secondary Cost Elements in SAP are created in the controlling module and have no relationship with the general ledger accounts. These secondary cost elements are created in the controlling module for internal assignment within the module. Posting to these secondary cost elements does not have any impact on financial statements. Secondary cost elements are used to transfer costs within controlling without having any impact on the FI module.

Secondary cost element categories are Internal Settlement, Assessment, Overhead rates, Internal Activity Allocation, Order/project results analysis, Project related incoming order: Sales related, Project related incoming order: other related.

4. Chart of Accounts and Fiscal Year Variant.

5. Cost center in SAP is a location where the costs occur inside the organization. In SAP cost center is the lowest organizational unit in controlling enterprise structure. Cost centers are responsible areas for costs within the organization and used to capture actual costs of an organization.

• Cost Center Accounting is used to identify the costs incurred by an organization
• Costs are tracked by individual areas of the organization called cost centers. Cost centers have responsibility for controlling costs
• Cost centers can plan future costs to have a basis for comparison with actual costs. This provides a means of measuring the cost center's performance in controlling costs
• All cost centers must appear somewhere in the controlling area's "standard hierarchy"
• If business areas are active in FI, each cost center must be assigned a business area
• All work centers in PP must be tied to a cost center, for this is where activities and prices are planned
• Statistical key figures can be posted to cost centers; these are used in reporting and allocations
• Cost centers can be planned and/or budget.