Controlling: Cost Accounting

Controlling
Cost Accounting
Recording of Cost which are related to expenses.It is not easy to record Cost of
the Product unless you use a technique.
Ex-To know Cost of the Product.
Mat 100 INR

Cost
Labor 100 INR
Cost
Rent 10000 INR
No.of units produced-Wait for the whole year or whole month.

Power-Monthly Basis
To overcome the technique of allocation we use Cost Accounting.
What are the cost should be considered and what cost not to be considered?
Production Cost Starts after Production.

Ex-Income tax-Pay only on Profit,Int on Loan(These Cost are not related to
production).
Cost Comprises of Material Cost,Labor Cost,Expenses(Rent,Power etc)
Classification of Cost
CO COMPONENTS
1. CONTRLLING AREA SETTINGS
2. Cost Element Accounting classifies the costs and revenues that are posted to
CO, and provides the capability for reconciliation of costs in CO with the Financial
Accounting (FI) module. Cost elements are of 2 types, Primary Cost Element and
Secondary Cost Element.
3. Cost Center Accounting- is an organizational unit within a controlling area that

represents a defined location of cost incurrence. Cost Centers can be defined
based on functional requirements, allocation criteria, physical location and
responsibility for costs.
Cost Center Accounting enables in analyzing the overhead costs according to

where they were incurred within the organization. Dividing an organization into
cost centers enables to achieve several goals like:
I)Assigning costs to cost centers lets you determine where costs are
incurred within the organization.
II)Planning costs at cost center level enables in checking cost efficiency at
the point where costs are incurred.
4.Internal Order Accounting- The internal order (IO) module within CO provides the
means for assigning planned costs and actual costs incurred for particular event carried
out within an organization or for particular employee. If a manager wishes to track the
costs associated with, say, Cost of Marketing seminar, cost of AGM the IO module can be
used to do so. Use of Internal Orders will be restricted for special events like trade shows
etc. where cost can be accumulated initially and then after assessing the results of the
event, costs can be settled (I.e. allocated) to respective cost centers.
I-AUC With Internal Order.
II-AUC With Investment Order.
5. Profit Center Accounting enables us to determine profits and losses by

profit center using period accounting.
Profit Center Accounting is a statistical accounting component. This means that it

takes transaction data posted in other components and represents it from a
profit-center-oriented point of view. The postings in Profit Center Accounting are
statistical postings, since the profit center is not itself an account assignment
object in Controlling.
6.Product Costing-
• Is the tool used in SAP for planning costs and establishing material prices.
• Is used to calculate the costs of goods manufactured and the costs of

goods sold for each product unit.
• Utilizes manufacturing’s quantity structures such as Bill of Material (BOM)

and Routings.
• Belongs to both the Production Planning (PP) Module and the Controlling
(CO) Module.
7.Profitability Analysis-
Profitability Analysis (CO-PA) Sub-Module in SAP is useful to customers who

need to evaluate market segments, which can be classified according to
products, customers, orders or any combination of these, or strategic business
units, such as sales organizations or business areas, with respect to company's
profit or contribution margin.
Controlling
Controlling provides the information for management decision-making. It

facilitates coordination, monitoring and optimization of all processes in an
organization.
Controlling is a tool used by the management for internal reporting and analysis.
The Controlling component (CO) provides a variety of tools that can be used to
provide operational information to the management of a company to support
business analysis and decision-making. The major CO components are:
• Overhead Cost Controlling,

• Product Cost Controlling, and
• Profitability Management.
If the company codes use different operational chart of accounts, inter company
code controlling can not be performed.
Step(1)Maintain Controlling Area (OKKP)(1:N Methodology)
SPRO > Controlling > General Controlling > Organization > Maintain Controlling
Area
Save
Click on Yes to Create Standard Hierarchy.

Double Click on Activate Component/Control Indicators
Maintain Controlling Area (OKKP)(1:1 Methodology)
Double Click on Maintain Controlling Area
New Entries
Click on Controlling Area=Co.Code
Co.Code=BU01
Everything is Coming Automatically By default Just give CCtr Std. Hierarchy.
Complete Both Steps Activate of Company Codes and Activate

Component/Control Indicators.
Step(2)Maintain Number Ranges for Controlling Documents (KANK)
SPRO > Controlling > General Controlling > Organization > Maintain Number
Ranges for Controlling Documents.
COIN-CO--Through-postings from FI
RKU1--Repost costs
RKU2--Repost revenue
RKU3--Repost CO line items
Repeat Same Steps for BU01.
Step(3)Maintain Versions
SPRO > Controlling > General Controlling > Organization > Maintain Versions
• Version are maintained centrally and added application-specific settings

for Profitability Analysis, Profit Center Accounting, and Overhead Cost
Controlling.
• Actual postings always uses version 0. For planning as many version can
be created to tailored to particular planning requirement.
• Versions are valid for fiscal year and needs to be extended every year.
• SAP uses versions in the Controlling Component (CO) to allow you to

maintain different plan or budget numbers to be able to monitor actual
numbers against scenarios. You must define a minimum of one version,
usually version0, known as the plan/actual version. The version ensures
that data is consistent among, for example cost center accounting,
internal orders, profit center accounting and profitability analysis.
Select ‘0’ Plan/Actual Version.
Double Click on Controlling Area Settings

Give your Controlling Area-BCOA
Select Version 0
Double Click on Settings for each Fiscal Year
Select 2015 FY
Click on Details Button
Select Price Calculation Tab

Click on NO
Repeat Same Settings for 2016,2017,2018,2019
We Can also Maintain One More Version for only Planning
Select Version 1
Copy as(F6)
Rename to B1
Press Enter
Save
Repeat Same Settings for B1 But Price Calculation Tab not to be Maintained for
Plan Version.
Cost Element Accounting

Cost and Revenue Element Accounting provides you with an overview of the
costs and revenues that occur in an organization. Most of the values are moved
automatically from Financial Accounting to Controlling. It involves creation of
Cost Elements, which are a mirror image of profit and loss accounts in CO. Cost
Element Accounting ensures real time data transfer from FI to CO.
Consider an expense GL account in FI, say “Advertising Account” with an account

# 100. It will be created as a Cost Element with the same description and
account # 100 in CO. Hence, any postings made in FI in this GL account, would
automatically create a controlling document and post the same in CO through
these cost elements.
Cost Element Accounting (CEA) is a submodule of CO. Cost flows between FI and
CO and within CO through cost element and/or revenue. When cost flows from
FI to CO, it flows through the primary cost element. When cost flows within CO,
it flows through the primary cost element as well as a secondary cost element.
Through cost element, you can track the point of origination of expenses.
 Primary Cost Element - costs that originate outside the company; relate
directly to the income statement in FI and must be included in the FI
Chart of Accounts
 Secondary Cost Element - costs that result from internal allocation
activities; NO relation to G/L accounts in FI. These accounts are
exclusively for cost accounting and are only maintained in CO.
If you have an expense account for which CO posting is required, a cost element
has to be created for cost accounting purposes. While posting within CO, you will
create a secondary cost element for which there will not be any FI posting.
FI CO
Liabilities No Elements
Assets No Elements
Income Revenue Elements
Expenses Expenses Element
Cost Element Categories

Commonly Cost Element Categories:
• Primary Cost Element Categories
• Primary Cost 1
• Accrual (%) 3
• Revenue 11
• Sales deduction 12
• External Settlement 22
• Secondary Cost Element Categories

• Internal settlement 21
• Assessment 42
• Internal activity allocation 43
All Expenses except Production variance and WIP.
All Incomes including Sales deduction.
Cost Element Category-
The following cost element categories can be used for primary cost elements:
01: Primary cost element
This category of cost element can be debited with all primary postings, for
example, in Financial Accounting (FI) or Materials Management (MM)
11: Revenue elements
The cost element category is used to post revenues.
12: Sales deduction
Cost elements of this category are used to post sales deductions. Sales
deductions (reductions, adjustments, corrections) are adjustment or deduction
postings of revenues, such as discounts and rebates. Certain revenues, such as
freight charged separately in the invoice, surcharges for small quantities or
special orders, are not classified as sales deductions. Such value items are
defined as revenue elements.
22: External settlement
Cost elements of this category are used to settle order, project, or cost object
costs to objects outside of Controlling. CO external objects can be, for example,
assets (AM), materials (MM) or G/L accounts (FI). The R/3 System always
creates an accounting document when you settle to external objects.You cannot
use this cost element category for settlement to objects within Controlling (such
as cost centers, orders, or projects). Use secondary cost element category 21 for
internal settlement.
The following cost element categories can be used for Secondary cost

elements:
21: Internal settlement
This cost element category is used to settle (further allocate) order or project
costs to Controlling (CO) internal objects. CO-internal objects are, for example,
orders, profitability segments, cost centers and projects.
31: Order/project results analysis
This cost element category is used to save the order/project results analysis
data on the relevant order/project.
41: Overhead rates
This cost element category is used to further allocate overhead costs using
overhead rates from cost centers to orders.
42: Assessment
This cost element category is used to allocate costs using the assessment
method.
43: Allocation of activities/processes
This cost element category is used during internal activity allocation and in

Activity-Based Costing.
Cost Element Creation

I)Manual
II)Automatic
PROCESS DECIDED
 The Primary & Secondary Cost Elements Structuring is to be maintained
properly.
 New primary cost element will be maintained. There should be corresponding
G/L account number for each and every primary cost element.
 New secondary cost element will be created as per the requirement.
 Naming of secondary cost element should be different from primary cost
element.
 Naming of the secondary cost element should be done properly so that User
can able to identify the cost element as per the different categories.
 Secondary cost elements will be defined with six digit numbering
pattern. Number will start with 9, second and third number digits will stand
for cost element categories. For example Cost Element 941000- (41-Cost
element category).
 Authorization of creating new cost element will be with the core team
member.
Step (1)Create Primary Cost Element in FI Area --Edit Cost Element (FS00)
Save
Step (2)Create Primary Cost Element in CO Area (KA01)

SAP Menu-Accounting-Controlling-Cost Element Accounting-Master Data-Cost
Element-Individual Processing-Create Primary
Step (3) Create Secondary Cost Element (KA06)
Step(4) Automatic Creation of Primary & Secondary Cost Element (for Existing
GL A/c)
a) Make Default Settings (OKB2)
SPRO-Controlling> Cost element accounting> Master data> Cost elements>
Automatic creation of Primary and Secondary cost elements> Make default
settings
Give your COA-BOCA
Press-Enter
Press-New Entries
b) Create Batch Input Session (OKB3)

Same Path
c) Execute Batch Input Session (SM35)

d)Testing and Check(KA02)
Automatic Creation of Cost Element (for New GL A/c)
Step(1) Make Default Settings (OKB2)

SPRO-Controlling> Cost element accounting> Master data> Cost elements>
Automatic creation of Primary and Secondary cost elements> Make default
settings
Step(2)Change COA(OB13)
Step(3)Create a GL Account
Ex-430013(Stationary exp),310003(Sales Commission)
Save
Testing in KA02(Display Cost Element)

Cost Element(Master Data)
Cost Element Groups

Cost Element Groups are logical combination of cost elements created based on
the nature and characteristics of the cost elements. It is a tree structure,
whereby similar cost elements are attached to a sub group created.
For Example: Cost Elements pertaining to Advertising and Sales Promotion can
be grouped under a Sub group called A&SP, which can be attached to the main
group called “Company X Cost Element Group”.
Cost Element Groups we use to allocate the Cost,Transfer of the Cost,Plan the
Cost,and for reporting purpose.
Step(9) Create Cost Element Groups (KAH1)
SAP Menu->Accounting->Controlling->Cost Element Accounting->Master data-

>Cost element group->Create
Step(10) Change Cost Element Groups (KAH2)
Cost Center Accounting

Overhead Cost Controlling component enables the planning, allocation, control,
and monitoring overhead costs. It further consists of the following three
components:
Cost Center Accounting

Cost Center Accounting determines where costs are incurred in the organization.
Costs are assigned to the sub-areas / responsibility centers of the organization
where they have originated from. This acts a tool for decision making by the
management.
Ex: Consider cost incurred for repairs and maintenance in an organization. The
same can be incurred for the Factory Building or Plant and Machinery. Hence, to
categorize the above expense, the two departments / sub areas are created as
cost centers “FACB” and “MACH” in CO. At the time of posting the FI document,
the respective cost center is assigned and posted.
Purpose
Dividing an organization into cost centers achieves the following objective:
- Assigning costs to cost centers lets you determine where costs are
incurred within the organization.
- Planning costs at cost center level can check cost efficiency at the point
where costs are incurred.
- If overhead costs should be assigned accurately to individual products,
services, or market segments, costs shall be allocated to those cost
centers directly involved in the creation of the products or services. From
these cost centers different methods are used to assign the activities and
costs to the relevant products, services, and market segments. This
enables the valuation of semi-finished and finished products in Product
Cost Controlling (CO-PC), and to calculate contribution margins in
Profitability Analysis (CO-PA).
Topics to be Covered
Cost Center Planning
Actual Posting
Reposting of Cost
Reposting of Line Item
Distribution
Assessment
Assessment with SKF
Activity Independent Planning
Activity dependent Planning
Cost Center Splitting
Definitions and Master Data Setup
The following key elements would be discussed:

• Standard Hierarchy
• Cost Center
• Activity Types
• Statistical Key Figures
Step(1)-Activate Cost Center Accounting in Controlling Area (OKKP)

SPRO->Controlling à General Controlling à Organization à Maintain Controlling
Area à Maintain Controlling Area (Selection Menu)
Step(2)Change Cost Center Standard Hierarchy ( OKEON)

SPRO->Accounting -> Controlling -> cost centre accounting -> master data ->
Standard Hierarchy -> Change
Standard Hierarchy
Standard Hierarchy is a tree structure representing all cost centers belonging to
a controlling area from a Controlling perspective.
Cost centers are combined into cost center groups. Cost center hierarchies are
then created from these groups by combining the groups according to decision-
making area, area of responsibility, or management area.
A cost center hierarchy comprises all cost centers for a given period and
therefore represents the whole enterprise. This hierarchy is known as the
Standard Hierarchy.
A Cost Center is an organizational unit within a controlling area that represents a

clearly delimited location where costs occur. The classification of the cost centers
can be made on the basis of functional, settlement-related, activity-related,
spatial, and/or responsibility-related standpoints. A Cost Center is Company
Code Specific.
Ex: Advertising, Manufacturing, HR department are examples of Cost Centers

within an organization.
Naming Convention for Cost Center Standard Hierarchy
Maximum 10 Digit.
Ex-BI01P11001
10-Admin Dept
20-HR Dept
30-Finance Dept
40-Purchase Dept
50-Quality Dept
60-Production Dept
70-Sales Dept
80-Stores
90-Utilities
Step(3) Create Cost Center (KS01)
SAP Menu->Accounting->Controlling->Cost Center Accounting->Master Data-
>Cost Center->Individual Processing->Create
Save
Step(4)Testing-FB50
Step(5) Change Cost Center (KS02)
Step(6) Delete Cost Center (KS04)

Step(7) Block Cost Center (KS02)
Step(8) Unblock Cost Center (KS02)
Step(9)Display Cost Center(KS03)
Step(10)Display Changes in Cost Center(KS05)
Step(11)Create Cost Center Group(KSH1)

SAP Menu-Accounting-Controlling-Cost Center Accounting-Master data-
Cost Center Group-Create
Activity Types
Activity types classify activity produced in a cost centre. E.g. Of activity types
can be machine hours, Labour Hours, etc. You link cost centers with activity
types during the planning for activity output. To plan and settle these activities,
quantities are measured in activity units. The activity quantity is valuated with a
price (sometimes also referred to as the “activity price”). In Overhead Cost
Controlling, the costs involving the activity quantity of an activity type are
managed separately in fixed and variable proportions. You can manually enter
prices for the activity types of a cost center, or have the system calculate them
based on the costs allocated to the activities. You can calculate prices based
both on planned and actual costs.
Activity Types are used to measure the output of an operation carried out at a
work center e.g. Machine Hours, labour hours, set up hours etc.
Ex: A cost center 1000 used to record manufacturing expenses. Typical activity
types for this cost center would be machine hours, units produced etc. Activity
unit is hours or quantity. Activity quantity is 500 hours or 1000 units produced
during a given period of time for which costs are posted.
Step(1)Create Secondary Cost Elements(KA06)

Step(2)Create Activity Types(KL01)
SAP Menu-Accounting-Controlling-Cost Center Accounting-Master data-Activity

Types-Individual Processing-create
Repeat Same Settings for BMCHHR(Machine Hour) and BSETHR(Setup Hour).

Step(3) Create Activity Types Groups (KLH1)
SAP Menu-Accounting-Controlling-Cost Center Accounting-Master data-Activity

Type Groups-Create
Statistical Key Figures

Statistical key figures are used to represent activities or statistics in a cost
centre, profit centre or order. They are measured in units of time or quantity.
The Statistical Key Figure is used as a basis for internal allocations, such
as distribution and assessment, and in key figure analysis e.g. cost per head.
This is defined at Controlling Area level.
Several statistical key figures can be combined into groups. Statistical key
figure groups can be used wherever you need to process several key figures in
one transaction. This could be in cost centre planning, or in distribution and
assessment.
Ex: Cafeteria costs are allocated to the individual cost centers based on the
number of employees in each cost center. In this case, the number of employees
in each cost center are recorded in the cost center as a statistical key figure.
There are only two types of Stat Key Figures (one period specific (total
values) and one not (fixed values).
 Within CCA, you use a statistical key figure (SKF) to distribute/ allocate
one or more cost center costs to various cost centers,e.g., the number of
employees in the IT department.
 The SKF may be a fixed value or a total value. With a fixed value SKF,
values will carry over to a future period, while a total value SKF is valid for
a particular period.
Step(1)Create Statistical Key Figures (KK01)
SAPMenu-Accounting-Controlling-CCA-Masterdata->SKF->Individual Processing-
Create
Step(2)Change Statistical Key Figures (KK02)
Step(3)Display Statistical Key Figures (KK03)
Step(4)Delete Statistical Key Figures (KK03DEL)
Step(5)Create Statistical Key Figures Group (KBH1)

Posting Of Planned Value(Manual Primary Cost Planning)
Cost center planning will be done; there by variance between Plan and Actual
can be calculated.
Both activity-independent (only to cost center) and activity-specific (to cost

center/activity type) primary costs are planned.
During activity-specific primary cost planning, you can split the figures
into fixed and variable costs. The System always updates the activity-
independent costs as fully fixed.
Cost element can be planned monthly or planned yearly and distributed

across such period. Specify which plan version, period, cost centre or CC group,
cost element or cost element group, activity types. We can have many versions
of planning and one final version as version 0.
Step(1) Set Planner Profile(KP04)
SAP Menu-Accounting-Controlling-Cost Center Accounting-Planning-Set Planner

Profile
Step(2) Maintain Planned Values for Cost Center (KP06)
SAP Menu -> Accounting -> Controlling -> cost centre accounting -> planning -
> cost and activity inputs -> change
Step(3) Display CC Planned Line Items (KSBP)
SAP Menu-Accounting-Controlling-Cost Center Accounting-Information Systems-

Reports for Cost Center Accounting-Line Items-Cost Center Plan Line Items
Step(4) Display CO Planned Document (KABP)

Reports for Cost Center Accounting-Line Items- Display CO Planned Document
Step(5)CO Actual Posting(FB60)
Actual postingsTransferring Primary Cost from all Module on real-time to

the Cost Centre. Transferring Activity Type from PP Module at the time of
production to the Cost Centre. Automatic Account assignment, For certain cost
elements, you can make the system to derive the cost center assignment
automatically.
Account Assignment Logic

• Cost and revenue postings in CO can trigger subsequent true and
statistical postings:
• True Postings
True postings can be processed, and can be allocated or settled with other
controlling objects.
• Statistical Postings
Statistical postings are only used for information purposes.
• Account assignment object determines whether a posting is statistical or

true with only exception cost center.
• Revenue can only be posted as true postings to a profitability segment,

sales order, sales project or a true order that can have revenues. Revenue
can also be recorded as statistical values on cost centers.
• Profit Center are posted with statistical postings.
• You can define automatic account assignment or default account

assignment for postings to primary cost elements.
• Default account assignment are defined in cost element master record

whereas automatic account assignment is defined in customizing (TC:
OKB9)
• Automatic account assignment has priority over default account

assignment.
Step(6)Cost Center Actual Line Items(KSB1)

Reports for Cost Center Accounting-Line Items-Cost Center Actual line items
Step(7)Display CO Document for Actual Cost(KSB5)
Samepath
Step(8)Variance Cost Center Actual/Plan/Variance(S_ALR_87013611)
Accounting-Controlling-Cost Center Accounting-Information Systems-Reports for

Cost Center Accounting-Plan/Actual Comparision-Cost Center
Actual/Plan/Variance
Planning aids
• Planning lock (TCODE: OKP1)

• Coping Planning to Planning (TCODE: KP97)
• Coping Actual to Planning (TCODE: KP98)
Reposting
By mistake we post to different Cost Center.
Sometimes adjustment of incorrect account assignment is required. This is

achieved through CO-internal reposting. The costs are reposted using a their
primary cost element.
The main difference between a reposting and an allocation is that in the case of
a reposting, original debit amount is always reduced on the sender, whereas for
allocation, the original debit amount is not changed, but a separate credit
amount written to the sender instead.
Example:
Step(1)Repost Line Items (KB61): For transferring values from one Cost
Center to other Cost Centers, FI Document is the base, Assign Element Group
RKU3 in KANK
Accounting > Controlling > Cost Center Accounting > Actual Postings > Repost
Line Items > Enter
Testing-KSB1
Step(2)Repost Costs (KB11N): When a new Cost Center is created (FI

Document not required, Cost Element is the base to Post to a newly created Cost
Center or Department), Assign Element Group RKU1 in KANK
Accounting > Controlling > Cost Center Accounting > Actual Postings > Manual
Posting of Costs > Enter
Testing-KSB1
Reposting of Line Items Reposting of Cost
We are referring the FI Doc. No reference of FI Doc

Line Item wise Cost Transfer Accumulated Cost Transfer
Offset account will appear in sending & Offset account will not appear in
receiving object. sending & receiving object.
FI-CO Real Time Integration

Before FI-CO Real Time Integration
Advertisement Cost born by Corporate but it belongs to two different Plant P1 &
P2.
1)Change Cost Center Standard Hierarchy.(OKEON)
2)Actual Posting(FB60)
3)Checking FI (FAGLB03) and Co(KSB1)
4)Reposting of Cost(KB11N)
5)Checking FI(FAGLB03) and CO(KSB1)
FI-CO Real Time Integration
Step(1) GL Master(FS00)
169500-FICO Real time Integration

Step(2)Define Variant for Realtime Integration
SPRO-F/A New-F/A Global Setting New-Ledgers-Real time integration of

Controlling-with FA-Define Variants for real time integration
Step(3)Assign variants for real time integration to Company Code
Step(4)Define Account Determination for real time integration(OK17)
Same Path->Account determination for real time integration->Define Account

deter
Step(5)Define Document type for entry view(OBA7)
Step(6)Define Document types for entry view in a ledger
Step(7)Define Document types for GL View.
Step(8)Define Document number ranges for entry view (FBN1)
Step(9)Define Document number ranges for GLview (FAGL_DOCNR)
Step(10)Classify Document types for Document Splitting
Step(11)Actual Posting(FB60)
Step(12)Checking FI (FAGLB03) and Co(KSB1)
Step(13)Reposting of Cost(KB11N)
Step(14)Checking FI(FAGLB03),FB03 and CO(KSB1)
Allocation Methods
Allocation is an activity of transferring the costs collected in one cost center to
one or more other cost centers. Two methods are available for allocation:
• Distribution
• Assessment
Allocation technique is used for transferring common costs incurred with in a

cost element to other cost centers which have been directly assigned to a
responsibility center.
Allocation(Month end allocation)
Reposting we do day to day activities.Whenever there was any wrong postings.

Distribution
We need to define Cycle for both Assessment and Distribution.
A Distribution is a business transaction that allocates the primary costs collected

in a cost center or business process to other CO objects like Cost Center,
WBS element, Internal Order, Cost Object or business process WITHIN
the same COST ELEMENT. This is done through creation of a Distribution Cycle.
Distribution Cycle (KSV1/KSV2/KSV3)
A Distribution Cycle is defined as a collection of rules for cost allocation. A cycle

contains a number of segments. A segment consists of the following elements
• Sender objects, whose values to be allocated are computed using

some rules
• Receiver objects, whose allocation bases are computed again using

some rules
Cycle
Segment1 Segment2 Segment3
Sending Receiving
Object Object
Distribution with Fixed Percentage
1.Define Distribution(KSV1)
SPRO->Controlling->Cost Center Accounting->Actual Postings->Period-end

Closing-Distribution-Define Distribution
Press Enter
SAVE Then BACK
Save
2.Actual Posting in Cost Center(FB60)
3.Testing(KSB1)
4.Distribution Run(KSV5)
SAP Menu->Accounting->Controlling->Cost Center Accounting->Period end

Closing->Single Function->Allocation->Distribution
Double Click on Line Item
Come back,Remove Testrun
5.Testing(KSB1)
Distribution with Variable type Actual SKF

1.Define Distribution(KSV1)
SPRO->Controlling->Cost Center Accounting->Actual Postings->Period-end

Closing-Distribution-Define Distribution
2.Canteen expenditure Posting (FB60)
3.Enter Statistical Key figure(Actual Posting)(KB31N)
SAP Menu->Accounting->Controlling->Cost Center Accounting->Actual Posting-

>Statistical Key figure->Enter
4 .Run Distribution Cycle(KSV5)
Double click on line item
5.Testing(KSB1)
Plan Distribution with Fixed Percentage
1.Define Plan Distribution(KSV7)
SPRO->Controlling->Cost Center Accounting->Planning->Allocate->Distribution-

>Define Distribution(KSV7)
2.Cost Center Plan Values(KP06)
Cost Center->Accounting->Controlling->Cost Center Accounting->Planning-

>Cost and Activity inputs->KP06-Change
3.Execute Plan Distribution Cycle(KSVB)
SAP Menu->Accounting->Controlling->Cost Center Accounting->Planning-

>Allocation->Distribution
4.Testing(KSBP)-Display Plan Cost Line Item(KABP)
Plan Distribution with Variable type Plan SKF

1.Define Plan Distribution(KSV7)
SPRO->Controlling->Cost Center Accounting->Planning->Allocate->Distribution-

>Define Distribution(KSV7)
2.Cost Center Plan Values(KP06)
Cost Center->Accounting->Controlling->Cost Center Accounting->Planning-

>Cost and Activity inputs->KP06-Change
3.Enter Plan Statistical Key figure(KP46))
SPRO->Controlling->Cost Center Accounting->Planning->Statistical Key Figure-

>Change
4 .Run Plan Distribution Cycle(KSVB)
5.Testing(KSBP)-Display Plan Cost Line Items for Cost Center
Assessment
Assessment is a method of internal cost allocation by which costs are transferred
from a sender cost center to receiver CO objects (such as orders and other cost
centers) under an ASSESSMENT COST ELEMENT.
The Assessment Cost Element is created as a Secondary Cost Element.
Allocation structure can also assigned in assessment cycle. Allocation structure

define which cost elements are to be allocated under which assessment cost
elements.
Parts pertaining to creation of Assessment Cycles and data to be maintained in
them is similar to that of Distribution Cycle.
Plan Assessment with Fixed Percentage
1)Create Assessment Cost Element(KA06)
SPRO->Controlling->Cost Center Accounting->Planning->Allocations->Create

Assesment Cost Element
2)Define Plan Assessment(KSU7)

3)Post Cost Center Plan Values(KP06)
4)Run Plan Assessment Cycles(KSUB)
SAP Menu-Accounting-Controlling-CCA-Planning-Allocations-KSUB-Assessment
5)KSBP
We Can’t see the Origin of the Cost Element,to over come this SAP Has given
allocation structure.So we can see origin and also we can use activity wise.
If the assessment for each segment is not made with a pre-defined assessment
cost element, you can assign the source cost elements to the desired
Assessment cost element in the allocation structure. During cycle definition,
enter the allocation structure instead of an assessment cost element in the
segment.
An allocation structure for the assessment consists of at least one assignment,

stating the assessment cost element to which the source element is assigned.
The original cost elements will already have assignments in the source.
Assessment with allocation structure
1)FS00 & KA01
430015 Canteen MaterialCost

450016 Canteen Rent Cost
450018 Canteen Mainta.Cost
430019 Factory Rent
430020 Office Rent
420001 Fuel Cost
420002 Water Cost
420003 Coal Cost
2)KA06
9420002-Canteen Assesment Cost
9420003-Rent Assesment Cost
9420004-Power Assesment Cost
3)Define Allocation Structure

SPRO-Controlling-CCA-Planning-Allocation-Assesment-Define Allocation
Structure
D.Click on AssesmentCost Element
Select 10,D.Click on Source

D.Click on Assignment Cost Element
Save
Similarly Do for Rent & Power.
Now it is Green for all the Three Assignment.

4)Define Plan Assessment Cycles(KSU7)
5)Cost Center Plan Values(KP06)
6)Enter Plan Statistical Key figures value
7)Run Plan Assesment Cycle(KSUB)
Actual Assessment with Actual SKF
1)Create Actual Assessment Cycle(KSU1)
SPRO->Controlling->Cost Center Accounting->Period-end Closing->Allocation-

>Maintain Assessment
2)Actual Cost Posting(FB60)
3)Post Actual SKF(KB31N)
4)Run Actual Assessment Cycles(KSU5)
5)KSB1
Activity Price Calculation

Activity Dependent Planning
Step(1)Create a Cost Center(KS01)
BI01108016-Washing CC
Step(2)Create a Cost Center Group
ACT_WSNCC-Activity Cost Center For Washing

Step(3)Output Planning-KP26
Step(4)Input Planning-KP06
Step(5)Activity Plan Price Calculation(KSPI)
Activity Independent Planning
Step(1)Create GL Account for Machine Rent & Electricity Convert this to

Cost Element
Step(2)Activity types Creation
Already Created
Step(3)Create Cost Center(KS01)

Step(4)Activity Input Planning(KP06)
Step(5)Activity Output Planning(KP26)
Step(6)Plan price Calculation(KSPI)
Machine Hours
Step(7)KP06
Step(8)KP26
Step(9)KSPI
Splitting Structure
Step(1)Define Splitting Structure(OKES)

Step(2)Create One more CCenter
Step(3)Assign Splitting Structure to Cost Center(OKEW)
Step(4)Input Planning(KP06)
Step(5)Output Planning(KP26)
Step(6)Splitting run(KS94)
Step(7)Plan price Calculation(KSPI)

Internal Orders
Internal Order is a cost object, which collects costs for management information
system and, in some instances, revenues for an organization.
Internal orders can be used to
• Monitor the costs of short-term measures
• Monitor the costs and revenues related to a specific service
• Monitor ongoing costs
Internal orders are divided according to function into the following categories:
• Overhead Orders:
Overhead orders monitor sub areas of indirect costs arising from short-term
measures. They can also be used for detailedmonitoring of ongoing plan and
actual costs independently of organizational cost center structures and business
processes.
• Capital Investment Orders:
Capital investment orders monitor investment costs, which can be capitalized

and settled to fixed assets.
• Accrual Orders:
Accrual orders monitor period-based accrual between expenses posted in

Financial Accounting and accrual costs in Controlling.
• Orders with Revenues:
Orders with revenues monitor the costs and revenues arising from activities for
partners outside the organizational boundaries, or from activities not belonging
to the core business of the organization.
If a manager wishes to track the costs associated with, say, Cost of Marketing seminar,
cost of AGM the IO module can be used to do so. Use of Internal Orders will be restricted
for special events like trade shows etc. where cost can be accumulated initially and then
after assessing the results of the event, costs can be settled (I.e. allocated) to respective
cost centers.
Statistical Internal Orders are meant only for statistical postings. It is used in cases
where Cost Center is already defined for a cost occurred but separate track is required
for reporting Purpose. E.g. Employee expense is posted to a cost center. But telephone
expenses may be tracked using Statistical Internal Orders.

An Internal Order is an extremely flexible CO tool that can be used for a wide variety of
purposes to track costs within a controlling area. Internal orders provide capabilities for
planning, monitoring, and allocation of costs.
Step(1)Activate Controlling Area(OKKS)

Step(2)Activate Order Management in Controlling Area.
Step(3)Define Order types(KOT2-OPA)
IMG → Controlling → Internal Orders → Order Master Data → Define Order Type
What is Order Type? What are the parameters it controls for internal
order?
An order type contains many kinds of control information that is important for
managing orders. This includes many default values that can be called upon
when we create a new order with this order type. We must assign each order to
an order type that transfers specified parameters to the order.
The order type is client-specific, which means that every order type can be used
in all controlling areas.
The order type control / determines the following fields for an order:
Order Category
Number Assignment
Control Indicator
Co Partner Updating
Order Classification
Commitment management
Revenue Posting
Integrated Planning
Settlement Profile
Planning Profile
Budget Profile
Similarly create for BR&D(Birla Research & Dev Order)
BTEL(Birla Telephone Order type(Statistical)

BVEL-Birla Vehicle Order type(Statistical)
Step(4)Maintain no.ranges for orders(KONK)
Click On Maintain Groups

Check Motor Pool A-ZZZ(External
Select BTEL & BVEL and Click on Assign Element Group
Step(5)Create Internal orders(KO01)
SAP Menu-Accounting->Controlling->Internal Orders->Master data-

>Special functions->Order-Create-KO01
KO02-Change
KO03-Display
Step(6)Create Internal Order Groups(KOH1)
Step(7)Enter Vendor Invoice Posting(FB60)
Step(8)To View Internal Order Actual Line Item Report (KOB1)
Accounting > Controlling > Internal Orders > Information Systems > Reports for
Internal Orders > Line Items > Orders: Actual Line Items
Give Order No. & Execute
Step(9) Co Documents for Actual Postings(KSB5)
Samepath
Planning and Budgeting in Internal Order

Planning can be done period-wise and cost element wise.
Budgeting can be done for the overall Period (number of years of years) or for a fiscal
year. Although the costs are planned at the cost centre, the actual costs are collected in
internal orders for analysis only, for example
Vehicles-: Separate orders will be created for each vehicle wherein the entire vehicle
related cost would be accumulated.
Employees-: Separate orders will be created for employees wherein the travel related
expenses could be statistically accumulated. The total cost of employees on account of
the above can be accessed by creating internal order groups.
Telephones: - Separate orders will be created for telephones wherein the
monthly expense could be statistically accumulated.
Step(1) Maintain Planner Profile for Overall Planning

Step(2) Maintain Budget Profile
Purpose: In this steps we will create budget profile and attach various
parameters that controls budgeting of an internal order.
Step(3) Define Tolerance Limits for Availability Control
Purpose: The Idea behind availability control is that SAP should alert you when
weare about to exceed some predefined percentage of project spending. This is
achieved through setting of tolerance limit associated with budget profile.
Step(4) Maintain Budget Manager
Purpose: In this step, we will assign budget manager to our order type. If our
expenditure crosses certain pre-defined limit, SAP will through a SAP Mail to the
budget manager.
Step(5) Creation of Internal Order(KO01)
Step(6) Internal Order Plan Values(KPF6) and (KOI2)
Step(7) Report for Internal order Planning
Step(8) Maintain Budget Values ,Internal Order Budgeting.

Step(9) Business Transaction Entry
Step(10)Check SAP Mail
Step(11) Business Transaction Entry(FB50)
Post more then Budgeted Amount.
Step(12)Internal Order Actual Line Items(KOB1)
Step(13)Internal Order Planned Values(KOBP)
Step(14)Internal Order Budget Line Items(KOB4)
Step(15)Actual/Plan/Variance Report(S_ALR)87013017)
Upto Internal Order Samepath-Information System-Reports for Internal Orders-

More Reports- Actual/Plan/Variance Report
Step(16)Budget/Actual/Commitments (S_ALR)87013019)
Step(17)Reposting Of Line Items(IO)-KB61
Step(17)Reposting Of Cost(IO)-KB11N
Step(18)Testing- Internal Order Actual Line Items(KOB1)
Settlement of Internal Order

Step(1)Maintain Settlement Cost Element.
SPRO-Controlling-Internal Order-Actual Posting-Settlement-Maintain Settlement

Cost Element
Step(2)GL Master(FS00)
420006-Lab Equipment Cost
420007-Research Material Cost

Step(3)Create Cost Element Group(KAH1)
BSTL-R&D—430000,410000(Wages), Lab Equipment Cost, Research Material

Cost
Step(4)Maintain Allocation Structure
I)With Allocation Structure
II)Without Allocation Structure
Step(5)Maintain Settlement Profile
Samepath
Step(6)Maintain No.ranges for Settlement Document(KO8N)
Step(7)Create Internal Order(KA01)
Step(8) Business Transaction Entry (FB60-Invoice Posting)
Step(9)Testing-Report-KOB1-Actual Cost Line Item for Order
Step(10)Internal Order Settlement(KO88)
SAP Menu-Accounting-Controlling-Internal Order-Period & Closing-Single

Functions-Settlement-Individual Processing
Step(11)Testing(KOB1,KSB1)
Model Order
Model order is not a real order in the commercial sense. It is customized with
certain default values, to reduce time and efforts while creating real internal
order. Model orders contain default values for the orders in an order type. We
need to enter the model order as the reference order in the order type. When
we create a new order, all the fields active in the relevant order type are copied
from the model order to the new order. Model orders make the work of entering
new orders considerably easier. The data that recurs in orders from a particular
order type is already defined. This reduces the likelihood of errors.
Manual
Step(1)Create Model Order(KOM1)

SPRO-Controlling-Internal Order-Order Master Data-Screen Layout-Define Model
Orders.
Step(2)Assign Model Order in Order type(KOT2_OPA)
Upto internal Order Samepath-Select Order Master data-Define Order type
Step(3)Create a New Order(KO01)
Automatic
Step(1)Strategy Sequence for Automatic Generation of Settlement Rules
SPRO-Controlling-Internal Order-Actual Postings-Settlement-Automatic gen of

Settlement rules- Strategy Sequence for Automatic Generation of Settlement
Rules.
Step(2)Assign Stategy Sequence to Order Types
Step(3)Internal Order(KO01)
Check in KOB1
Step(4)FB60
Check in KOB1
Step(5)Internal Order Settlement(Multiple Orders)KO85
SPRO-Accounting-Controlling-Internal Order-Period-End Closing-Single Function-

Settlement-Collective Processing
Step(6)Testing in KOB1
What is Order Category?
A technical classification criterion for orders. The order category determines the
SAP application to which an order belongs, and controls the functions with which
an order can be processed. SAP has provided standard order category these are
01 - Internal Order (Controlling)
02 – Accrual Calculation Order (Controlling)
03 – Model Order (Controlling)

04 – Co Production Orders
05 – Product Cost Collector Etc…
What is Settlement Profile?
In settlement profile we are defining a range of control parameters, how the

order will be settle to other cost object. We must define the settlement profile
before we can enter a settlement rule for a sender.
What is Planning Profile?
This profile contains parameters and default values for overall planning. We can
also assign an order type to the planning profile at a later date.
We need planning profiles for the planning methods below:
->Overall planning for internal orders
->Hierarchy cost planning for projects
->Preliminary costing for production orders that do not have a quantity structure
(CO production orders).
->Cost planning for investment programs or investment measures, and for

appropriation requests.
->Financial budgeting
What is Budget Profile?
Budgeting with in SAP provides the user with enhanced project management
capabilities not provided by internal order planning. Where an internal order

planning is an estimate of expenditure made at the beginning of the fiscal year,
a budget represents the actual approved amount of funding for a given order.
Because thebudgeted amount is maintained separately we have an opportunity
to do plan versus budget comparisons. This profile contains parameters and
default values for budgeting. We can also assign an order type to a budgeting
profile at a later date.
What is Reference Order / Model Order?
What is Settlement Rule?
The settlement rule determines what portions of a sender's costs are to be

settled to which receiver(s).
We specify this by assigning one or more distribution rules to each sender.

Typically there is one distribution rule for each receiver. This is carried out at
order level.
What is availability control in Internal Order?
It is process where user of the internal order will caution at a particular point of
time,when order cost reached at a particular stage. The Idea behind availability
control is that SAP should alert us when we are about to exceed some
predefined percentage of the budgeted amount. This activity is carried out
through the establishment of spending tolerance levels associated with each
budget profile controlling area relationship.
What is budget manager?
Budget manager is a person, who has been assigned to internal order type for
being informed, when an internal order spending reaches a particular level.
When we are maintaining the action setting for availability control, SAP offers us
a decision of whether to return a warning with or with out a mail message. If we
have chosen warning with a mail, we must have established the proper budget
manager setting before the mail process will work.
1.11 What is Internal Order Status Management?
Status management is the act of determining and managing what transactions

are valid for an order at any given time with in its life cycle. The term life cycle
was coined by SAP to refer to an order’s fluid existence, moving from one phase
to another until it is closed .
AUC With Internal Order

450000-AUC Mat Cost
450001-AUC Lab Cost
450002-AUC Other Services Cost
450100-AUC Settlement Cost

Covert to Cost Element
Step(2)Create a New Internal Order type(KOT2_OPA)
Save
Step(3)Maintain No.ranges for Order(KONK)
Step(4)Maintain Allocation Structure(OKO6)
SPRO-Controlling-Internal Order-Actual Posting-Settlement-Maintain Allocation

Structure
New Entries
BC-Allocation Structure for AUC
Double click on Assignment
New entries
Save
Select 10-Material Cost
D.Click on source
Give your Controlling Area-BCOA

Press Enter
Double Click on Settlement Cost Element
New entries
Repeat Same Settings for 20 and 30
Step(5)Define/Maintain Settlement Profile(OKO7)
Samepath
Enter Settlement Profile in Order type(KOAL)
Asset Accounting
Step(6)Asset Settlement Profile to Company Code
SPRO-F/A New-Asset Accounting-Transaction-Capitalise of AUC-Define & Assign

Settlement Profile
Double Click on Define Settlement Profile
Step(7)Assign Settlement Profile to Company Code(OAAZ)

Step(8)Create Asset Master(AS01)
Save
Step(9)Create Internal Order(KO01)
Save
Go to Change Internal Order(KO02)

Step(10)Business Transaction(FB60)
Post
Step(11)Internal Order Actual values(KOB1)
Step(12)Internal Order Settlement(KO88)
Step(13)Testing-Internal Order Actual values(KOB1)
Step(14)AW01N
Step(15) Create Asset Master(AS01)
Step(16)Define Distribution rule for AUC Assets.
SAP Menu-Accounting-F/A Ing-Fixed Assets-Postings-Capitalise AUC-

Distribute(AIAB)
Step(17)Settle AUC(AIBU)
Samepath
Step(18)AW01N
Investment Management
Investment management refers to planning and managing of investments in

long term activities. The long term investments may be for the purpose of
creation of fixed assets for internal purposes, or may be an execution of job
works and also investments in big projects. To manage theses type of
investments we should have a definite plan, budget and control over these
types of investments. The efficient management of long term investments
will make the organization strong and highly solvent as well. Hence each
organization pays high priority attention to take care of such long term
investments. Long term investment definitely draws attention of planning,
budgeting and work flow as per predefined set parameters for the investment.
EX: If the investments made in fixed assets

for the organization, it is linked to asset accounting module and internal
order module. To under stand the investment module we must have idea
about asset accounting, general ledger accounting, and internal orders also.
In sap the investment management has 4 components.

1. Appropriation requests.
2. Investment programmes,
3. Investment as internal orders.
4. Investments as projects.
Investments as internal order:

A long term investment may some times consider as an internal orders.
Generally in case of make to order type industries, this type of investment
management will be considered. Some times in house production of fixed
assets also can be considered as investment as internal orders. We have
already dealt this topic while discussing internal order management
Settlement transactions to AUC through internal orders. For this purpose
we have to define investment profiles separately and asset class as investment
measure.
Investment programmes:
A structured capital budget programmes for producing fixed assets and long
term services are called a investment programme. An Investment programme
consists of different capital budget programmes. Definition of Investment
programme is the back bone configuration of investment programme
management.
The core component of configuration in investment programme is the

definition of Investment programme type. However, if you want to define
the investment programme type the following configurations are pre
requisites.
1. Planner profile
2. Budget profile
3. Status profile. We can define these profiles or we can use the system
defaulted profiles.
Besides the above some other configurations are required to define the
programme types.
1. Person responsible,
2. Reasons for investment,
3. Priority
4. Investment scope.
Step(1) Define planning profile for investment

Path: investment management-investment programme-planning in
programme-cost planning-maintain planning profiles. TC: OIP1
Step(2) Define budget profile:

Path: same as up to investment programme>budget programme>define
budget profile for investment type: TC: OIB1
Step(3) Define investment programme type:

Path: investment management-investment programmes-master datadefine
programmetype: TC:OIT3
Step(4) Define responsible person: path: investment management-investment

programmes-master data-allowed values for creation of master data-
define person responsible: TC: OPS6
Step(5) Define reasons for investment: path is same as above: TC
Step(6) Define priorities: path is same: we can use the defaulted priority codes
for the project
Step(7) Define the scale of the project: path is same:
In this configuration we set the cost of the project fall within the category
specified
Step(8) Define investment programme definition:

Path: accounting-investment management-programmes-master datainvestment
Programme definition: IM01
Step(9) Define investment programme structure:

Path: investment management-programme-master data-investment
programme structure: TC:IM22
Step(10) Investment programme planning: path: investment

managementprogrammes-progrmme planning-IM35
Step(11) investment management-

programmes-budgeting-edit original budget
Step(12)Verification of report for investment programme: information

systeminvestment
management report-programmes current data-planned valuess_alr_87012808
planned and overall values.
Step(13)Investment programs can be deleted by the user: path: investment

management-programmes-environment-current settings-delete programmes:
s_alr_87003576.
We can delete the investment programmes if there is no plan or budget

data.
AUC With Investment Order
Step(1)Define Order Types
SPRO-IM-Internal Order as Investment Measures-Master Data-Orders-Define

Order types.
Step(2)Define Screen Layout for Asset Master Data.
SPRO-IM- Internal Order as Investment Measures-Master Data-AUC-Define

Screen Layout for Asset Master Data.
Step(3)Change Asset Class(OAOA)
Step(4)Determine Dep area in Asset Class(OBYZ)
Step(5)Define Model Order(KOMI)
Upto IM Samepath- Internal Order as Investment Measures-Master Data-Orders-

Define Model Orders
Step(6)Define Investment Profile
Step(7)Assign Investment profile to Model Order
Step(8)Model order link to Order type(KOT2_OPA)
Step(9)Create Investment Order(KO01)
SAP Menu-Accounting-Investment Measures-Internal Orders-Master Data-

Special Functions-Order-Create(KO01)
Step(10)Enter Business Transaction(FB60)
Step(11)KOB1-Report Actual Cost Line Items
Step(12)Change Allocation Structures
SPRO-IM-Internal Order as Investment Order-Settlement-Maintain Allocation

Structures
Step(13)Settle Investment Order Cost to AUC Asset(KO88)
Step(14) KOB1-Report Actual Cost Line Items
Step(15)AW01N-Asset Explorer
Step(16)Settle AUC Asset value to Final Asset(KO88)

Stetp(17)AW01N-Asset Explorer
Profit Center Accounting
The main purpose of Profit center accounting is providing the opportunity to

analyze and report to the management regarding internal profitability of sub
units. Hence it is called a company code with in a company code. It can capture
the financial statements as well as Return on investment also within a company
code level. It is called as management tool to analyze the performance of
particular organizational unit and compare the variances for taking a strategic
decision.
To Know Product wise Profitability
To Know Area wise Profitability
Expenditure  Through Cost Centers
Income  Through Automatic Assignments
 A Profit Center can have one or more Cost Centers

 In PCA, Postings will be done through DERIVATION RULES
 Profit Center and Business Area will be assigned in Cost Center
PCA – Product wise Structure (Sales Accounts Product wise):
Company
Company Code
Business Area
| | |
Product 1 (Profit Center) Product 2 (Profit Center) Product 3 (Profit Center)
| | |
Cost Center A Cost Center B Cost Center C
PCA – Area wise Structure (Business Area = Profit Center):

Company
Company Code
| | |
Busi Area 1 (Product 1) Busi Area 2 (Product 2) Busi Area 3 (Prod 3)
| | |
Cost Center A Cost Center B Cost Center C
Step(1)Set Controlling Area
SPRO > Controlling > Profit Center Accounting > Basic Settings > Set
Controlling Area
Step(2)Maintain Controlling Area Settings
SPRO > Controlling > Profit Center Accounting > Basic Settings > Controlling
Area Settings > Maintain Controlling Area Settings
Select ‘Elimination of Internal Business’
PC Local Currency: ‘20’ Controlling Area Currency
Select ‘Store Transaction Currency’
Valuation View: Legal Valuation
Step(3)Creation of Dummy Profit Center (KE59)
SPRO > Controlling > Profit Center Accounting > Master Data > Profit Center >
Create Dummy Profit Center
Step(4)Set Control Parameters for Actual Data(1KEF)

Area Settings > Activate Direct Postings > Set Control Parameters for Actual
Data
New Entries Check on ‘Line Item’ and ‘Online Transfer’
Step(5)Maintain Plan Versions
Area Settings > Activate Direct Postings > Plan Versions > Maintain Plan
Versions
Select ‘0’ Plan/Actual Version
In ‘Settings for PC Accounting’  Year: 2003
Select ‘Online Transfers’ and ‘Line Items’
Exchange Rate Type: ‘B’ Bank Selling
Step(6)Creation of Profit Center (KE51)
Accounting > Controlling > Profit Center Accounting > Master Data > Profit
Center > Individual Processing > Create
Step(7)Assignment of Profit Center in Cost Center (KS02)
Accounting > Controlling > Cost Center Accounting > Master Data > Cost Center
> Individual Processing > Change
In Cost Center, Select ‘Master Data’ Button and Assign Profit Center
Step(8)Creation of Sales A/c. and Revenue Cost Element (FS00)
‘Sales – Product 1’ Account under Sales Group Field Status Group: G001
Environment > Edit Cost Element  Cost Element Category: ‘11’ Revenues
Step(9)Automatic Account Assignments for Revenue Elements (OKB9)
SPRO > Controlling > Profit Center Accounting > Actual Postings > Maintain
Automatic Assignment of Revenue Elements
New Entries Co. Code: XYZ Cost Element: Sales – Product 1 A/c. No.
** Account Assignment: ‘2’ Business Area Mandatory **
Save the record & Double click ‘Details per Business Area/Valuation Area’
New Entries Business Area: Give Business Area
Profit Center: Give Profit Center for Product 1
Step(10)Derivation Rule for Assignment of Balance Sheet items to Profit

Center (3KEH)
(Where Business Area = Profit Center)
SPRO > Controlling > Profit Center Accounting > Actual Postings > Choose
Additional Balance Sheet and P&L Accounts > Choose Accounts
New Entries Account From: 100000 To: 299999
Default Profit Center: Profit Center for Product 1
Step(11)Derivation Rule for Finding the Profit Center
SPRO > Controlling > Profit Center Accounting > Actual Postings > Choose
Additional Balance Sheet and P&L Accounts > Derivation Rule for Finding the
Profit Center
Menu ‘Strategy’ > Display Change Select ‘Create Step’ Button
Derivation Rule: Business Area to Profit Center Assignment
Under ‘Source’, Select Drop Down Menu (Under RACCT)
Select ‘GSBER’ Business Area & Save
Select ‘Maintain Rule Values’ Button
Select ‘On/Off’ Button (Source Fields On/Off) Ctrl+F4
From Account To Account Business Area Profit

Center
100000 299999 HYD Product 1
100000 299999 MUM Product 2

Step(12)Define Number Ranges for Local Documents (GB02)
SPRO > Controlling > Profit Center Accounting > Actual Postings > Basic
Settings Actual > Define Number Ranges for Local Documents
Select ‘Maintain Groups’ Button
Check on ‘Actual Doc from Direct Posting with GB01’
Group > Insert Co. Code: XYZ Enter
Text: Actual Documents for XYZ
Year: 2003 From Number: 1 To Number: 100000 Enter & Save
The same way Check on ‘Planned Doc from Direct Posting with GB01’
Interval > Maintain Co. Code: XYZ Select ‘Interval’ Button
Year: 2003 From Number: 100001 To Number: 200000 Enter & Save
Step(13)Planning of P&L items for Profit Centers (7KE1)
Accounting > Controlling > Profit Center Accounting > Planning >
Cost/Revenues > Change
Version: ‘0’ Plan/Actual Version
Period  From: MonthTo: Month Fiscal: 2003
Profit Center: Product 1
Account Numbers: 100000 To 499999
Entry  Select ‘Form Based’
Select ‘Overview Screen’ & Plan as desired
Step(14)Planning Balance Sheet Accounts (7KE3)
Accounting > Controlling > Profit Center Accounting > Planning > Balance Sheet
Accounts > Change
Plan as desired in the above way

Step(15)Profit Center Plan/Actual/Variance P&L items
(S_ALR_87013326)
Accounting > Controlling > Profit Center Accounting > Information System >
Reports for Profit Center Accounting > Interactive Reporting > Profit Center
Group: Plan/Actual/Variance
Give Period, Profit Center & Execute Report can be viewed
From Reporting Screen use ‘Call up Report’ option for other Reports & Vouchers.
Step(16)Profit Center Plan/Actual/Variance Balance Sheet items

(S_ALR_87013336)
Accounting > Controlling > Profit Center Accounting > Information System >
Reports for Profit Center Accounting > Interactive Reporting > Profit Center
Group: Balance Sheet Accounts: Plan/Actual
Product Costing
Product costing is one of the important tools in SAP environment. It explains
how to determine the cost of product or a unit. Product costing is used to
know the unit cost of the goods manufactured or sold. It helps not only to
know the cost of production, but also useful to know the profitability of the
product. In sap the product cost planning has been divided into four
components.
These are
1. Product cost planning
2. Cost object planning
3. Material ledger
4. Information system
• Is the tool used in SAP for planning costs and establishing material prices.
• Is used to calculate the costs of goods manufactured and the costs of

goods sold for each product unit.
• Utilizes manufacturing’s quantity structures such as Bill of Material (BOM)

and Routings.
• Belongs to both the Production Planning (PP) Module and the Controlling
(CO) Module
• Bridges the gap between Accounting and other functional areas.

Material Cost:
Can be derived from the Bill of material used in the production module.
Bill of material contains the quantity of raw material used in the process of
production. The material price will be taken from Material Master.
WORK CENTRE:
The organizational unit, where the actual production activities are taking
place.
ROUTINGS: is called the scheduled process of manufacturing in a work
center is called routings.
Cost Sheet: is used to determine the overheads.
To determine the cost of goods sold SAP uses costing variants: the cost of
goods sold is used by different modules for different purposes. In Material
Management the cost of goods sold is used to determine the raw material
cost and finished goods inventory. In production planning module the cost
of goods sold is used to determine the Price variances and product cost or
unit cost or standard cost. Overhead modules used the cost of goods sold as
to know the cost of resources
1. Product cost Planning:
Product cost planning is used to estimate the standard cost of a product. In
standard costing we determine the cost of a product, valuation of materials,
and finished goods inventories. It further decides the profitability margin
there by we can derive the result analysis in profitability accounting. In
product cost planning component, we used to derive the information from
the following areas to determine the standard cost of a product.1.Material
management 2.cost center accounting 3.production planning. If you use the
information from all three components to know the product cost is called as
“Cost estimation with quantity structure. Determination of product cost with
quantity structure uses the information from production module extensively,
like BOMs and routings irrespective of the kind of production activities it
undertakes.
2. Cost Object Planning:
The another way of determination of product cost or standard cost is Cost
Object Planning. In this method the total costs of a product will be derived
through the cost objects for which the actual costs are assigned. Product
cost planning is the basis for cost object planning. The cost Object Planning has
the following process. First one is preliminary costing in which the cost
will determine in normal way. In the second one the costs will be assigned
to various cost objects and finally the assigned cost object costs were
compared with the planed costs and prepare the variance analysis for the
cost of production. The cost objects are as follows.
a. Production orders.
b. Process orders
c. Sale orders.
All the costs either directly or indirectly must be assigned to the above cost
objects compulsorily.
3. Material Ledger:
Material ledger useful to collect the information in respect of all the materials.
it useful for determine the material costs for various purposes in different
valuation area.
The main purpose of either product cost planning or cost object planning to
determine the cost of goods sold. The basic information regarding the cost
of goods sold is as under.
Raw Material Cost
Invntry RM Cons RM Qty Rate Value.

RM -
Dom 233000 403000 BRMD01 20 150 3000
RM-Imp 233001 403001 BRMI01 10 200 2000
Consumables 233030 403030 BCN001 2 500 1000
Packing Mat 233050 403050 BPK001 1 100 100
6100
Converstion cost
BI0110809
10 Water Clearing BWC_CLN 1 BWTLAB 10 5 50 94360100
BWTSET 20 10 200 94360101
ChemicalCleanin BI0110809
20 g BWC_CLN1 2 BCMLAB 30 2 60 94360110
BCMMCH 40 8 320 94360111
BI0110809
30 Assmbl-Melting BWC_ASM 3 BMLLAB 30 4 120 94360200
BMLMCH 50 5 250 94360201
BMLSET 40 6 240 94360202
BWC_ASM BI0110809
40 Assmbl-Polishing 1 4 BPLLAB 70 2 140 94360210
BPLMCH 90 1 90 94360211
BI0110809
50 Packing Cost BWC_PAK 5 BPKLAB 1 6 6 94360300
BPKMCH 1 4 4 94360301
1480
Overhead Cost
Material OH 10% 610 9410100
Production OH 15% 222 9410110
Admin OH 5% 379 9410120
1211
Cost of
Production 8791
Step(1) Define Origin Groups (Optional)

IMG-Controlling-Product Cost Controlling-Product Cost Planning- Basic Settings
for Material Costing-Define Origin Groups
Origin groups are created to subdivide the material costs further. Materials
assigned to the same cost element by automatic account determination can
be separated into origin groups.
• If an origin group is entered in the costing view of the material master
record, the combination of origin group and cost element is updated in the
Controlling module.
• If the Material origin indicator in the costing view of the material master
record is specified in addition to the origin group, the costs are updated under
the combination of material number and cost element in the Controlling
Step(3)Secondary Cost Element(KA06)
Costing Sheet
Step(1) Define Calculation Bases
IMG -Controlling à Product Cost Controlling-Product Cost Planning-

Basic Settings for Material Costing-Overhead-Costing Sheet:
Components -Define Calculation Bases
The calculation base determines to which cost elements overhead is applied

together.
We will define 2 bases on which overheads will be calculated:-
1) Materials
2) Conversion Cost
Step(2) Define Percentage Overhead Rates
IMG –Controlling-Product Cost Controlling-Product Cost Planning-

Components-Define Percentage Overhead Rates
We want to calculate 10 % overhead on Material and 15% on wages. But the

condition is that, it should be only calculated for plant BI01.
To fulfill the above requirement we need to select the dependency overhead

type/ plant. Thus the system will only calculate overhead rate for plan t BM01.
In the Std. SAP system there are quite a number of dependencies available
such as plant, order type, overhead type, overhead key, company code etc.
Here we can calculate Plan and actual overhead. Plan overhead rate is
required for the purpose of planning the cost of the product (standard cost
estimate). Actual overhead rate is required for the purpose of charging it to
the production order.
In this step we will create the overhead rate , attach the dependency and
define the overhead rate. Further we will also define whether it is plan or
actual.
Step(3) Define Credits
IMG-Controlling-Product Cost Controlling-Product Cost Planning-

Components-Define Credits
By defining the credit key you are crediting the cost center and debiting the
product or the production order. The credit on the cost center happens with
the overhead cost element which we created earlier 910001 Material
overhead and 910002 production overhead.
Here we attach the overhead cost center which is to be credited.
You can also define what percentage of the overhead is to be allocated as
fixed costs.
Therefore we will create 2 credit keys one for material overhead and other for
the production overhead.
Step(4) Define Costing Sheets
IMG-Controlling-Product Cost Controlling-Product Cost Planning-

Basic Settings for Material Costing-Overhead-Define Costing Sheets
The costing sheet integrates all elements of overhead costing defined earlier
such as calculation base (Z910Material, Z911 Wages), overhead rates (Z913
Material overhead, Z915 production overhead) and the credit key
(Z01,Z02).
Let us create a new costing sheet.
The overhead is dependent on the plant.
Material overhead @ 5% is calculated on Material costs and production

overheads @ 4 % are calculated on wages.
Step(5) Define Cost Component Structure
IMG –Controlling- Product Cost Controlling-Product Cost Planning-

Basic Settings for Material Costing-Define Cost Component Structure
The cost components breaks down the results of the standard cost
estimate into factors such as raw materials, packing material, material
overhead, salaries and wages, production overheads, depreciation and
other costs.
We are defining the cost component structure as a primary cost component

split. As a result primary costs from cost centers are included in the cost
estimate.
There are various configuration settings to be defined for the individual cost
component.
We will briefly discuss each of them here:-
1) Cost share – Whether the cost component is relevant only for variable
cost or Fixed and Variable costs.
2) Roll up cost component - The "Roll up" indicator determines, for
example, that the costs for the usage of a raw material in a
semi finished product are displayed in the cost estimates of the higher level
semi finished products and of the finished product.
3) Filter criteria – Whether the cost component is cost of good

manufactured or Sales and administration costs.
4) Inventory valuation – Whether the cost component is relevant for
inventory valuation or not, or only relevant for variable costs or relevant
for both fixed and variable costs.
Cost Component Views
You can display the results of the cost estimate in the following views:
• Cost of goods manufactured
• Sales and administration costs
• Inventory (commercial)
The cost component views are created using the attributes of the cost
components in the cost estimate. When you create a cost estimate, you can
display the costs in the cost component views defined.
Material Cost Estimate with Quantity Structure
In the steps we will configure a costing variant. A costing

variant has various components within it like costing type, valuation
variant, date control, quantity structure control, transfer strategy etc. We
will first see the components within it and finally the costing variant.
Costing variant is a link between application and customizing and
enables us to cost a product (mainly Finished goods and Semi-finished
goods).
Step(1)Define Costing Types
IMG à Controlling à Product Cost Controlling à Product Cost Planning à

Material Cost Estimate with Quantity Structure àCosting Variant:
Components à Define Costing Types
In the costing type, you define which field in the material master record the
costing results can be transferred to:
Standard cost estimate as the standard price or the field commercial price.
You can also specify that no update takes place in the material master.
Further you define here which valuation view is costed. Legal, Group or profit
center (in case material ledger is activated)
Step(2) Define Valuation Variants

Components à Define Valuation Variants
Valuation variant containing the parameters required for valuation of a cost
estimate.
Step(3) Define Date Control
IMGà Controlling à Product Cost Controlling à Product Cost Planning à

Components à Define Date Control
Date control, controls the dates on which the quantity structure and the value
structure are created. The dates determine the following parameters :
• For product costing ( material cost estimate with quantity structure ,
sales order costing)
The validity period of the cost estimate
The date on which the quantity structure is determined (quantity
structure date)
The date on which the q uantity structure is valuated (
Date control determines which dates are proposed or displayed when a cost
estimate is created, and whether these dates can be changed by the user.
The standard system contains predefined date control IDs. You can use these
without making any changes.
Step(4) Define Quantity Structure Control

Components à Define Quantity Structure Control
Quantity structure control is used in cost estimates with quantity structure to
specify for each plant how the system searches for valid alternative BOMs
and alternative routings to create a quantity structure for multilevel BOMs . The
search is carried out on the basis of two parameters:
• Application of BOMs to determine alternatives automatically
This key determines how the system should choose the suitable
alternative for the different company areas in which the BOM is used.
• Selection ID for selecting alternative routings
This key determines the priority given to routings during routing
selection.
Step(5) Define Transfer Strategy

Components à Define Transfer Strategy
The purpose of this setting is to prevent the system from creating a new cost
estimate for a material when costing data already exists. Instead, the existing
costing data is simply transferred into the new cost estimate. This improves
performance.
• Single-Plant Transfer
If cost estimates for certain materials already exist in the individual
levels of the BOM, they are not recosted. Rather, the existing costing
data is transferred into the cost estimate in accordance with the
transfer c ontrol.
If you always want to recost, choose the transfer control No transfer.

• Cross-Plant Transfer
The following special procurement types are taken into account for
transfer into material cost estimates:
Ø Transfer from other plant
Ø Production in other plant
If you have entered one of these special procurement types in the
costing view of the material master record, the system proceeds as
follows:
o In the plant from which the material component is withdrawn
according to the special procurement type, the system looks for
existing costing data and transfers that data into the cost
estimate.
Strategy Sequences for Single -Plant and Cross-Plant Transfer
The strategy sequence determines the order in which the system searches for
costing data. If the system cannot select a cost estimate even after reaching
the end of the strategy sequence, it explodes the BOM of the material and
creates a new cost estimate.
You can define up to three strategies for single-plant transfer and three
strategies for cross -plant transfer.
You limit the search further by setting the following indicators:
• Within current fiscal year
Here the costing dates must lie within the current fiscal year.
• Age (periods)
Here you can specify how many periods the system should search for
costing data in. If the indicator within current fiscal year is set, the
number of periods that you enter here is limited to the fiscal year.
If you turn on the indicator Transfer only with collective requirements

material. the transfer depends on the requirements indicator of the
material component.
• For materials in the individual requirements the system creates a
new cost estimate even if a cost estimate for the material exists
according to the strategy sequence.
• For materials in collective requirements, the existing cost estimates are
transferred into the new cost estimate.
Master Data
Step(1) Create Material Master(MM01)
i)Define MRP Controller(PP Settings)(OMD0)
SPRO-Production-Material Requirement Planning-Master Data-Define

MRP Controller
ii)Define attributes of Material Type(OMS2)
HIBE,VERP
iii)Create Material Master(MM01)
Step(2)Create Bill of Material(CS01)
SAP Menu-Logistics-Production-Master data-Bill of Material-Material BOM-CS01-

Create
Step(3)Create Work Center
i)Create Activity Types(KL01)
ii)Create Activity Groups(KLH1)
iii)Activity Planning(KP26)
iv)Create Work Center(CR01)
Logistics-Production-Master Data-Work Centers-CR01-Create
Step(4)Routing(CA01)
SAP Menu-Logistics-Production-Master data-Routings-Standard

Routings-Create
Step(5)Automatic Account Assignment(OBYC)
Step(6)Cost estimate with Quantity Structure(CK11N)
SAP Menu-Accounting-Controlling-Product Cost Controlling-Product Cost

Planning-Material Costing- Cost estimate with Quantity Structure-Create
Step(6)Price Update
Cost Object Planning
Step(1)Define Costing Sheet
IMG -Controlling-Product Cost Controlling-Cost Object Controlling-

Product Cost by Order-Basic Settings Overhead-Define Costing Sheets
Step(2)Check Valuation Variants for Manufacturing Orders(PP)(OPN2)

Upto Product Cost by Order Same Path-Select Manufacturing Order- Check
Valuation Variants for Manufacturing Orders
Step(3)Check Costing Variants for Manufacturing Order(OPL1)
IMG-Controlling à Product Cost Controlling-Cost Object Controlling-

Product Cost by Order-Manufacturing Orders-Check Costing Variants for
Manufacturing Orders (PP)
Step(4) Check Order Types
IMG –Controlling-Product Cost Controlling-Cost Object Controlling-

Product Cost by Order-Manufacturing Orders -Check Order Types
Here an important thing we need to check is the settlement profile. Settlement

profile PP01 is attached to the production order type
PP Settings
Step(1)Defining Production Scheduling Profile
Use
The purpose of this activity is to create the production-scheduling profiles for
specific plants.
Procedure
1. Access the activity using one of the following navigation options:
IMG Menu Production  Shop Floor Control  Master Data 
Define production scheduling profile
Transaction OPKP
Step(2)Defining Production Scheduler and Assign Prodn Sch. Pro.
Use
The purpose of this activity is to define production schedulers for your plants. In
addition to this, you can assign a control profile to each production scheduler.
By assigning production schedulers to materials within the application, you can
define responsibilities for a material within production activity control.
Procedure
IMG Menu Production ® Shop Floor Control ® Master Data ®

Define production scheduler
Transaction OPJ9
Step(3)Defining ATP Checking Control
Use
The purpose of this activity is to define parameters for the confirmation of
operations.
Procedure – For ZS01 & ZS03

IMG Menu Production  Shop Floor Control  Operations 
Availability Check  Define Checking Control
Transaction OPJK
Step(4)Defining Scheduling Margin Key(OPJZ)
Step(5) Defining Reduction Strategies(OPJS)
Step(6) Defining Scheduling Parameters for Production Orders
Use
The purpose of this activity is to define for each plant the order type, the
production scheduler and the parameters for the scheduling of production
orders.
Procedure
Scheduling  Define Scheduling Parameters for
Production Orders
Transaction OPU3
Step(7) Defining Confirmation Parameters
Use
The purpose of this activity is to define parameters for the confirmation of
operations.
Procedure – For ZS01

Confirmation  Define Confirmation Parameters
Transaction OPK4
Step(8) Material Requirement Planning – Define MRP Controller
Use
In this step, you define a number that is assigned to the MRP controller.
The MRP controller is a person or a group of persons responsible for monitoring

material availability. You can use the number entered here, for example, to
select the planning results per MRP controller.
Procedure
SAP Menu Production  Material Requirements Planning 
Master Data  Material  Define MRP Controller
Transaction Code SPRO
Step(9) Defining Order Type
Use
In this step you define order types. An order type contains control information
that you need for managing orders. You have to assign every order to an order
type.
For SBT (Sujan Barre Thomas Antivibration Systems Pvt. Ltd.) we have following
Order Types:
1. ZS01 – Standard SBT Production Order

2. ZS02 – Standard Production order (external NA)
3. ZS03 – Standard SBT Rework Production Order
Procedure
IMG Menu Production  Shop Floor Control  Master Data 
Order  Define Order Types
Transaction OPJH
Work in Process
Step(1)GL Master FS00
Step(3) Define Results Analysis Keys
IMG à Controlling à Product Cost Controlling à Cost Object Controlling à

Product Cost by Order à Period-End Closingà Work in Process à Define
Results Analysis Keys
Each order for which you want to create work in process (WIP) must receive a
results analysis key. The presence of a results analysis key in the order
means that the order is included in WIP calculation during period-end closing.
Results analysis keys are alre ady defined in the SAP standard system.
Step(4) Secondary Cost Element(KA06)

Step(5) Define Results Analysis Versions(OKG9)

Results Analysis Versions
Here you create result analysis version per version in controlling area. In
controlling area we have 3 actual version 0, D01, D02. Since currency and
valuation profile is active we have 3 versions. In case that is not active you will
have only one plan/actual version 0.
Step(6)Define Valuation Method (Actual Costs)

Valuation Method (Actual costs)
In this step we define a valuation method for the calculation of work in

process.
This creates the link between the controlling area, the results analysis key, the
results analysis version, and the system status.
When you create new valuation methods, you specify whether the work in
process should be valuated at target costs or actual costs.
In the Product Cost by Order component the work in process is normally
valuated at actual costs. The value of the work in process is the difference
between the debit and the credit of an order as long as the order has the
status PREL (partially released) or REL (released).
The valuation method for WIP calculation is linked to a system status.
The following status codes are relevant for WIP calculation in this component:
• PREL - The order is partially released.
• REL - The order is released.
• DLV - The order has been completely delivered.
• TECO - The order is technically completed.
If the status is PREL or REL, the system creates work in process in the
amount of the actual costs with which the order is debited.
If the status is DLV or TECO, the system cancels the work in process. The
difference between the debit through actual costs postings and the actual
credit of the order from goods receipts is interpreted as a variance with this
status.
Step(7) Define Line Ids

Product Cost by Order à Period-End Closingà Work in Process Define Line
IDs
The line IDs serve to group the work in process and reserves for unrealized
costs according to the requirements of Financial Accounting.
Reserves for unrealized cost means a production order has a partial

goods receipt, but the actual issues (material and activities) to the
production order is less than standard and the system expect the se
issues to be made, therefore reserves for unrealized cost can be created
if required for these costs which are debited short.
The work in process or reserves for unrealized costs are calculated as a total
for each order and apportioned to the line IDs. You can define separately for
each line ID whether the work in process for that line ID must be capitalized.
To pass the data on to Financial Accounting, you must define posting rules
that link this data to G/L accounts.
Step(8) Define Assignment
IMG à Controlling à Product Cost Controlling àCost Object Controlling à

Product Cost by Order à Period-End Closing à Work in Process àDefine
Assignment
Here we assign the cost elements to line IDs under which an order is debited
or credited.
In the Assignment, we can also define the work in process that must be
capitalized and in what amount. For example, we can s pecify that:
100% of the work in process calculated from the material costs can be
capitalized
80% of the work in process calculated from the indirect costs can be
capitalized
We assign the cost elements combined in line IDs to one of the following
groups:
WIPR - Work in process with requirement to capitalize (ReqToCap)
WIPO - Work in process with option to capitalize Costs e (OptToCap)
WIPP - Work in process with prohibition to capitalize costs (CannotBeCap)
Step(9) Define Update

Product Cost by Order à Period-End Closing à Work in Process àDefine
Update
I
In the earlier step define assignment we have assigned the cost elements of
material beginning with 4 to line id ZMA, internal activities beginning with 9 to
the line id ZSC and GL code 462001 to ZAL.
Now here we assign for Line ID ZMA to a results analysis(ra) cost element
931001 and to a category K (costs), ZSC to a ra cost element 931002.
Thus all material withdrawals, internal activites, external activities, and

overhead are assigned to line IDs of category K (costs).
The system creates work in process for each debit posting that is updated
under one of these cost elements. These values are updated under the
results analysis cost elements (cost element category 31) that you specify
here.
We must assign all credits, such as for material issues and order settlement to
line IDs of category A (settled costs). For each credit posting that is updated
under one of these cost elements, the system reduces the work in process.
Step(10) Define Posting Rules for Settling Work in Process

Product Cost by Order à Period-End Closing à Work in Process à Define
Posting Rules for Settling Work in Process
In this step we specify the G/L accounts in Financial Accounting to which the
work in process is settled. We assign a results analysis cost element or a
group of results analysis cost elements to two G/L accounts.
A FI is generated on the basis of the settlement of work in process:-
Entry passed:-
WIP account Debit (Balance sheet)
Change in WIP Credit (Profit & loss account)
We can assign the results analysis data to the G/L accounts at the following
levels:
• Results analysis categories
The results analysis categories are created on the basis of the
assignment of the costs to line IDs:
WIPR - Work in process with requirement to capitalize costs
WIPO - Work in process with option to capitalize costs
WIPP - Work in process with prohibition to capitalize costs

We normally define a posting rule that assigns the work in process with
requirement to capitalize costs to the G/L accounts for unfinished
products (balance sheet) and stock changes (P/L).
• Results analysis cost elements
In this case you assign the individual results analysis cost elements to
the G/L accounts.
For example, the work in process for the direct material cos ts is
updated under results analysis cost element 931001 and the work in
process for the production costs under results analysis cost element
931002, you can pass this information on to different G/L accounts in
Financial Accounting.
In our scenario we do not want the results to be updated to different GL

codes.
Step(11) Define Number Ranges

Product Cost by Order à Period-End Closing à Work in Process à Define
Posting Rules for Settling Work in Process
When work in process is calculated, the following business transactions are

carried out:
KABG Automatic results analysis
KSWP Calc. primary target costs (WIP)
KSWS Calc. secondary target costs (WIP)
CO documents are created when these transactions are carried out. The
system assigns numbers to these documents.
We must maintain number ranges to restrict the areas for the numbers
assigned or to categorize according to certain criteria.
The number range is already defined or copied while maintaining the
controlling area.
Variance Calculation
Step(1)Define Variance Keys

Product Cost by Order à Period-End Closingà Variance Calculation à
Define Variance Keys
We define variance keys in this step. Production orders can only be selected
for variance calculation if a variance key is entered in the order. .
In cumulative variance calculation, the target costs are calculated on the basis
of the quantity you have transferred to stock for the order. The actual costs
are for the entire life of the order. Variance calculation requires that the order
have the status DLV (delivered) or TECO (technically completed).
Step(2)Define Default Variance Keys for Plants

Define Default Variance Keys for Plants
We assign a variance key to the plant in this step.

Variances are calculated on the basis of the variance key shown in the order
master record. This entry is defaulted as follows:
• When we create a material master record, the system proposes a
default variance key for that material master through the plant.
• When we create a production order, process order for this material, the
system proposes a default variance key through the entry in the
material master record.
This value gets copied automatically when a plant is copied. No maintenance

is generally required here. If it is not then you should manually maintain the
default variance key for plant BI01
Step(3)Check Variance Variants

Check Variance Variants
Variance variants determine what variance categories are calculated.
The following variance categories can be calculated:
Variances on the input side:
• Scrap variances
You specify whether scrap variances are calculated in the step Define
Variance Keys . This enables you to control the display of scrap or the
deduction of the scrap from the actual costs separately for each
variance variant; you can also control this separately for each variance
variant by assigning the variance variant to a target cost version.
• Input price variances
Input price variances are the differences between the planned prices
and the actual prices of the resources used
• Input quantity variances
Input quantity variances are differences between the planned and
actual input quantities of the resources.
• Resource-usage variances
A resource-usage variance arises when a different resource is used
than was planned.
• Remaining input variances
Remaining input variances are differences on the input side that cannot
be assigned to any other variance category on the input side (such as
overhead).
Variances on the output side:

• Lot size variances
Lot size variances are differences between the planned fixed costs and
the charged fixed actual costs. Lot size variances can only be
calculated for target cost version 0 .
• Output price variances
Output price variances are differences between the target credit (at the
standard price) and the actual credit (for example at the moving
average price).
• Mixed-price variances
If we valuate your inventories with mixed prices, mixed-price variances
may result if the standard price calculated on the basis of the mixed
cost estimate is not the same as the target cost of the procurement
alternative.
Example:
Suppose the standard price for a material was calculated in a mixed
cost estimate. The material has price control indicator S, which means
that the goods receipts are valuated at the standard price and the order
is credited accordingly. When the system calculates the total variance,
it compares the control cost (in this case the actual cost) with the
procurement alternative for which the order was created. If the target
cost for the procurement alternative is not the same as the credits at
the standard price, a mixed-price variance will result.
• Remaining variances
Remaining variances are variances that cannot be assigned to any
other variance category (for example, rounding differences). If the
system cannot calculate any target costs, only remaining variances will
be calculated.
Variances are calculated for all variance categories that are selected in this
view.
• If a particular variance category is not selected, the variances of that
category will be assigned to the remaining variances. Scrap variances
are an exception to this: if you don't want to see scrap variances, these
variances can enter all other variance categories on the input side.
• If no variance categories are selected, only remaining variances will be
calculated.
The Minor differences field enables us to have small amounts charged and
settled as remaining variances, although they are still assigned to the relevant
variance category in the detail screen of variance calculation.
Step(4)Define Valuation Variant for WIP and Scrap (Target

Costs)

Define Valuation Variant for WIP and Scrap (Target Costs)
Step(5)Define Target Cost Versions

Define Target Cost Versions
Target cost means the costs expected to be incurred when a specific quantity
is produced. In Cost Object Controlling, the target costs are calculated on the
basis of the planned values of a service unit (such as the planned cost of a
production order) and the control quantities (such as the yield delivered to
stock).
Target costs can be used to determine variances, valuate WIP, and valuate
unplanned scrap
The target cost version specifies which data is to be compared. The target
cost version also specifies which variance variant is used and therefore which
variance categories are calculated.
Target cost version 0 is the only target cost version that is relevant to
settlement. That is, only the variances calculated with target cost
version 0 can be settled to Profitability Analysis.
Only in target cost version 0 can we specify a valuation variant for the
valuation of scrap and work in process, rest all other target cost version are
for information.
Step(6)Define Number Ranges for Variance Documents

Define Number Ranges for Variance Documents
When variances are calculated various controlling business transactions are

carried out.
When these business transactions are carried out, CO documents are created
containing the target costs, variances, scrap, and distributed actual costs.
Numbers are assigned for these documents . We have to maintain number
ranges for these transactions.
Settlement
Step(1)Create Settlement Profile

Product Cost by Order à Period-End Closingà Settlement à Create
Settlement Profile
In the settlement profile, we define a range of control parameters for

settlement. We must define the settlement profile before we can ente r a
settlement rule for a sender.
If we want to settle variances to Profitability Analysis, we must also set the

Variances indicator and allow settlement to a profitability segment.
Let us create a settlement profile for the production order, after that it must be
saved in the order type
Create PA Transfer Structure

Product Cost by Order à Period-End Closingà Settlement à Create PA
Transfer Structure
To do this configuration you need to have configured the operating

concern. Assign the operating concern to the profitability analysis .
You can configure this step after you have set up the costing based
Profitability analysis as shown in the e -book Profitability analysis.
In the PA transfer structure you determine which cost element groups are
assigned to which value fields in Profitability Analysis (CO-PA). You make
these assignments within so-called "assignment lines".
Maintain Number Ranges for Settlement Documents

Product Cost by Order à Period-End Closingà Settlement à Maintain
Number Ranges for Settlement Documents
SAP System creates a settlement document each time an object is settled.

In this step we define the intervals, or number ranges, for settlement
documents for our controlling area 9100.
Profitability Analysis
 To know the Profit – Product wise, Customer wise, Sales Org. wise and
Plant wise, Hence it is called a ‘Data Cube’
 Data will flow from MM, PP, SD and FI
 ‘Operating Concern’ is to be created
 The structure we follow is ‘Co. Code = Controlling Area = Operating
Concern’
In Operating Concern:
Profitability Segment (Data Structure)  Characteristics & Value Fields
Characteristics: Product, Customer, Sales Organization, Plant
Value Fields: Sales, Cost of Goods Manufactured, Freight, Quantity, Price

This is one of the important components of SAP to know the profitability of
various segments or an organization. This is coined as COPA or PA with in
sap. This will enable to report the performance in different angels and view
points. The Main purpose of this tool in the hands management is to know
the profitability of various market segments. In this sub module
COPA, use many characteristic values to know the profitability. The
characteristic values are well below the gross margin levels ie.products,
customers, customer groups, sales area, region, divisions, and industry also.
To take up the Profitability Analysis, we have to define the Operating

Concern.
was reengineered in such a way to useful for easy decision making. To

under take this, we have to make configuration settings, to capture the data
from various sub modules of SAP to COPA. Hence, to represent the values
in COPA, system uses two different approaches. 1. Costing based
profitability and 2. Account based profitability. An Operating Concern
can use the above two independent approaches to capture and hold the data
or can be used simultaneously also. However, the final result of the two
approaches is one and the same.
The main difference between two approaches is how the data storage
mechanism involves, like values and quantities. In Costing based COPA
the values and quantities are stored in value fields. Where as in account
based COPA values are updates in accounts.
Time updates in COPA
With the help of characteristic fields and value fields, we have to create
data structures, for the profitability segment. To create the data structures,
we have to predefine the Operating Concern.
Step(1)Maintain Characteristics(KEA5)
SPRO-Controlling-Profitability Analysys-Structures-Define Operating Concern-

Maintain Characteristics
Step(2)Maintain Value Fields(KEA6)
Step(3) Create Operating Concern (KEA0)
SPRO > Controlling > Profitability Analysis > Structures > Define Operating
Concern > Maintain Operating Concern
Step(4) Assign Controlling Area to Operating Concern
SPRO > Enterprise Structure > Assignment > Controlling > Assign Controlling
Area to Operating Concern
Step(5) Assign controlling area to operating concern
IMG > Enterprise Structure > Assignment >Controlling >Assign

controlling area to operating concern.
Step(6) Define Profitability Segment Characteristics (Segment –Lvl

Characteristics)
IMG >Controlling >Profitability Analysis >Structures >Define Profitability

Segment Characteristics (Segment-Lvl Characteristics)
Step(7) Set Operating Concern (KEBC)

IMG >Controlling >Profitability Analysis >Structures >Set Operating
Concern
Master Data
Step(1)Maintain Characteristics values
IMG >Controlling >Profitability Analysis >Master Data >Characteristic

Values >Maintain Characteristic Values
Here we maintain the values for the user defined characteristics.
Step(2)Maintain External Maintenance Group

SPRO-Logistic General-MM-Settings for Key fields- Maintain External
Maintenance Group.
Step(3)Define Characteristic Derivation
IMG >Controlling >Profitability Analysis >Master Data >Define

Characteristic Derivation
Here you set up the derivation of characteristic values. Derivation allows us to

find values for certain characteristics automatically based on the known
values of other characteristics, where these characteristics are logically
dependent on one another.
Step(4)Assign External Maintenance Group in Material Master(MM02)
Step(5) Define Characteristics Hierarchy
IMG >Controlling >Profitability Analysis >Master Data >Characteristic

Values >Define Characteristics Hierarchy
You can define hierarchical structures for characteristics in Profitability

Analysis (CO-PA) and analyze these structures in the information system.
You can for example structure your products or customers in a hierarchy.
In our scenario we will create a hierarchy of sales group into sales offices. We
are combining sales groups into sales offices. This hierarchy can be used in
the reports for analysis purpose.
Step(6) Define and Assign Valuation Strategy(KE4U)
IMG >Controlling >Profitability Analysis >Master Data >Valuation>

Valuation Strategies >Define and Assign Valuation Strategy
=> Customizing request generated here
Here we define valuation strategies and assign them to a point of valuation.

Since we want to use the material cost estimate for valuation, we will check
the material costing field and specify the quantity field.
Step(7) Define Keys for Accessing Material Cost Estimates

Set Up Valuation Using Material Cost Estimates >Define Access to
Standard Cost Estimates
Product Cost Planning is used to determine the planned cost of goods

manufactured for a finished product. In CO-PA, we access these material cost
estimate to valuate data in CO-PA.
Here we define costing keys to determine which cost estimates from Product
cost planning should be used to valuate actual or planning data in CO-PA.
Step(7) Assign Costing Keys to Any Characteristics

Set Up Valuation Using Material Cost Estimates à Assign Costing Keys to
Any Characteristics
Step(8) Assign Value Fields
IMG >Controlling>Profitability Analysis >Master Data >Valuation>

Set Up Valuation Using Material Cost Estimates>Assign Value Fields
Here we assign the cost component structure from Product cost

planning to the values fields of our operating concern.
Flow of Actual Data
Step(1) Define Number Ranges for Actual Postings
IMG >Controlling >Profitability Analysis >Flows of Actual Valuesà Initial

Stepsà Define Number Ranges for Actual Postings
Here you define a number range to be used for actual line items.
A number range group and number range is automatically generated

when an operating concern is created.
Step(2) Maintain Characteristic Groups
IMG à Controlling à Profitability Analysis à Flows of Actual Values à Initial

Steps à Characteristic Groups à Maintain Characteristic Groups
Here you define "characteristic groups", which can be any combin ation of
characteristics in operating concern.
A characteristic group determines the characteristics for which users can
specify individual values when assigning a posting to a profitability segment,
as well as the order in which these characteristics appear on the screen.
You can also define whether the user is required or is allowed to specify
values for certain characteristics, or whether the user cannot make an entry.
Step(3)Assign Value Fields

Upto Profitability Analysis-Flows of Actual Values-Transfer of Incoming Sales
Order-Assign Value Fields
Step(4) Assign Quantity Fields(KE4M)
Step(5)Transfer of Billing Documents
IMG-Controlling-Profitability Analysis-Flows of Actual Values-

Transfer of Billing Documents à Assign Value Fields
All revenues, sales deductions are defined as condition type in SD. In this
step, you assign these conditions type to the corresponding CO-PA value
fields.
Step(6)Assign Quantity Fields

IMG à Controlling à Profitability Analysis à Flows of Actual Values à
Transfer of Billing Documents à Assign Quantity Fields.
Step(7) Maintain PA Transfer Structure for Direct Posting FI/MM

(KEI2)
IMG  Controlling  Profitability Analysis  Flows of Actual Values 

Direct Posting from FI/MM Maintain PA Transfer Structure for Direct
Postings
Here you define the PA transfer structure which is used to post costs and
revenues directly to profitability segments. You specify how the cost elements
are to be defined to the CO-PA value fields.
Step(8) Automatic Account Assignment (OKB9)

Direct Posting from FI/MMà Automatic Account Assignment

Automatic postings created in Materials Management, can be passed on to
Profitability Analysis (CO-PA) by means of an automatic assignment to a
profitability segment.
Step(9)Define PA Transfer Structure for Variance Settlement

Settlement of Production Variances à Define PA Transfer Structure for
Variance Settlement

Here you define a transfer structure for transferring production variances
during the settlement of production orders.
When variances are calculated in Cost Object Controlling (CO-PC), on

production order, you transfer these variances - differentiated by cost element
and variance category - to value fields in CO-PA.
Step(10)Assign PA Transfer Structure to Settlement Profile

Settlement of Production Variances à Assign PA Transfer Structure to
Settlement Profile
Step(11)Activate Profitability Analysis

Activate Profitability Analysis
Report Painter(COPA)
Step(1)Define Forms for Profitability Report(KE34)
SPRO>Controlling>Profitability Analysis Report>Information System>Report

Components>Define Forms>Define forms for Profitability Report
Step(2)Create Profitability Report
SPRO > Controlling > PA > Information System > Report Components > Define Forms > Create
Profitability Report
Step(1)SAP Standard Menu  Accounting  Controlling  Cost Center Accounting


Information system  Tools  Report Painter  Report Writer  Library 
GR23 - Display
or
SAP standard menu  Information Systems  Ad Hoc Reports  Report

Painter  Report Writer  Library  GR23 – Display
Let us see the Library 1VK which we are going to use for creating a
report:-
Libraries
Libraries is a base (or transfer structure) for Report Painter. In a Library you use
a report table, which is defaulted by SAP and cannot be maintained. The Library
provides a logical view of various database tables and includes all
characteristics, key figures, and predefined columns.
In Cost Center Accounting, table CCSS is used as the transfer structure.
In a library, you collect the characteristics, key figures, and predefined

columns from the report table, which you need for your Report Painter
reports. The table name is stored in the header of each library.
Step(2) Create Variable
SAP Easy access-Accounting-Controlling-Cost Center Accounting-

Information system à Tools à Report Painter à Report Writer à Variable à
GS11 - Create
We will create a variable for cost element group group CL. Cost element group
CL is a grouping of all cost elements grouped according to logical grouping.
Revenues, Salaries & Wages, Logistical costs, Admin costs.
This cost element grouping will be in used in the report so as to show the
grouping of costs. If you do not require any grouping of cost elements you need
not create any variable.
Step(3) Create Report
Accounting-Controlling-Cost Center Accounting-Information System-

Tools à Report Painter à GRR1 - Create
Report Painter functions similar to Report Writer, but is easier to use. Most of the
functions found in Report Writer have been built into Report Painter; however,
you do not need to be familiar with all Report Writer concepts such as Sets in
order to use Report Painter.
Report Painter uses a graphical report structure, which forms the basis for your
report definition and displays the rows and columns as they appear in the final
report output.
Step(4) Report Group
SAP Easy access à Accounting à Controlling à Cost Center Accounting à

Information system à Tools à Report Painter à Report Writer à Report group
à GR52 – Change
Report groups incorporate all the reports within a library that access similar data
but format these data differently.
All reports within a report group are executed at the same time, thus giving you
the opportunity to jump between individual reports within the report display
screen.
Generally there is one to one co-relation between report and report group.
Step(5) Transporting Reports
SAP Easy access à Accounting à Controlling à Cost Center Accounting à

Information system à Tools à Report Painter à Utilities à Transport à Report
groups à GCTR - Transport request
A report can be transported from one system to another (i.e. Development to

Quality system) using this transaction code.

Controlling: Cost Accounting

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Controlling

Ex-To know Cost of the Product.

Mat 100 INR

No.of units produced-Wait for the whole year or whole month.

To overcome the technique of allocation we use Cost Accounting.

Production Cost Starts after Production.

Cost Comprises of Material Cost,Labor Cost,Expenses(Rent,Power etc)

1. CONTRLLING AREA SETTINGS

3. Cost Center Accounting- is an organizational unit within a controlling area that

Cost Center Accounting enables in analyzing the overhead costs according to

I-AUC With Internal Order.

II-AUC With Investment Order.

5. Profit Center Accounting enables us to determine profits and losses by

Profit Center Accounting is a statistical accounting component. This means that it

• Is used to calculate the costs of goods manufactured and the costs of

• Utilizes manufacturing’s quantity structures such as Bill of Material (BOM)

Profitability Analysis (CO-PA) Sub-Module in SAP is useful to customers who

Controlling provides the information for management decision-making. It

• Overhead Cost Controlling,

Click on Yes to Create Standard Hierarchy.

Click on Controlling Area=Co.Code

Everything is Coming Automatically By default Just give CCtr Std. Hierarchy.

Complete Both Steps Activate of Company Codes and Activate

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

• Version are maintained centrally and added application-specific settings

• SAP uses versions in the Controlling Component (CO) to allow you to

Select ‘0’ Plan/Actual Version.

Double Click on Controlling Area Settings

Double Click on Settings for each Fiscal Year

Click on Details Button

Select Price Calculation Tab

Repeat Same Settings for 2016,2017,2018,2019

We Can also Maintain One More Version for only Planning

Cost Element Accounting

Consider an expense GL account in FI, say “Advertising Account” with an account

Cost Element Categories

• Secondary Cost Element Categories

All Expenses except Production variance and WIP.

All Incomes including Sales deduction.

Cost Element Category-

01: Primary cost element

11: Revenue elements

The cost element category is used to post revenues.

12: Sales deduction

22: External settlement

The following cost element categories can be used for Secondary cost

21: Internal settlement

31: Order/project results analysis

41: Overhead rates

43: Allocation of activities/processes

This cost element category is used during internal activity allocation and in

Cost Element Creation

Step (2)Create Primary Cost Element in CO Area (KA01)

b) Create Batch Input Session (OKB3)

c) Execute Batch Input Session (SM35)

Step(1) Make Default Settings (OKB2)

Testing in KA02(Display Cost Element)

Cost Element Groups

Step(9) Create Cost Element Groups (KAH1)