AC040--Overview of Controlling

Overview of Controlling[@more@]

1.General Tasks of Controlling
*The general term accounting is used to describe a variety of different functions and business processes. The SAP R/3 system architecture comprises specialized accounting components that serve these various functions.

.The Treasury (TR) component concentrates on functions such as cash management, treasury management (for instance, funds, foreign exchange, derivatives, and securities),loans and market risk management.

.Financial Accounting (FI) chiefly involves the general ledger (G/L),processing receivables and payables, and asset accounting.

.Investment Management (IM) supports planning, investment, and finance processes for capital investment measures.
*Controlling (CO) offers a variety of tools that can be used in preparing operational information for business analysis and decision making by management.

*The main purpose of Overhead Cost Controlling (CO-OM) is to take costs that cannot be assigned directly to the goods and services of a company and allocate them as far as is possible according to their cause.

*Product Cost Controlling takes the costs for producing goods and services (and in certain cases also their sales revenues) and settles them to financial accounting or to profitability and sales accounting

*Profitability and Sales Accounting is used for enterprise planning. Its main focus, however, is the determination of the business profit and loss in actual. Two views are always used for this purpose: the external view in the market for analyzing profitability segments (Profitability Analysis) and the internal view of individual parts of the company responsible for profit (Profit Center Accounting).

*The main areas of Controlling are used for different tasks and types of analysis:
.Cost Element Accounting classifies the costs and revenues posted to CO. It also enables the reconciliation of the costs in CO with Financial Accounting (FI).

.Overhead Cost Controlling examines the causes of costs in the functional areas of an enterprise.Activity-Based Costing (ABC) provides you with more ways of allocating costs.

.Product Cost Controlling is used for costing and evaluating the cost of goods manufactured for a product, and the costs and possibly revenues when providing a service or when carrying out a project (plan and actual).

.Profitability Analysis deals mainly with analyzing the results of enterprise activities on the external market.
.Profit Center Accounting analyzes the success of the subareas in the enterprise that are responsible for profits.

2.Overview of CO Components
*Cost and Revenue Element Accounting (CO-OM-CEL) is part of Overhead Cost Controlling.
*Overhead Cost Controlling has two components, Cost Center Accounting and Cost and Revenue Element Accounting.
*Cost Center Accounting (CO-CCA) is used to determine where costs are incurred in your organization.

*You can use internal orders for different purposes. Internal orders can be split into four categories:
.Overhead cost orders: used to monitor overhead costs that are incurred for a certain purpose or for documenting costs
.Investment orders: used to monitor costs that are incurred for an asset under construction
.Accrual orders: offsetting entry of accrual costs (calculated costs in CO) to cost centers
.Orders with revenues: used as cost objects so that costs and revenues can be tracked

*Cost Center Accounting answers the question of where costs were incurred,while Activity-Based Costing answers the question of why (for what purpose) costs were incurred.

*Product Cost Controlling consists of the following components:
.Product Cost Planning is used for preliminary costing purposes and can answer the following questions:
--What will the production of a certain product or service cost?
--Is external procurement less expensive than on-site production?
.Cost Object Controlling focuses on simultaneous costing and the period-end closing.
--Actual production costs are cumulated alongside raw material consumption when completing the work.
--Period-end closing calculates the value of goods still in production (work in process) and the variances between the cost estimate and the actual costs, and settles them to other components such as CO-PA, EC-PCA and FI.

*Actual Costing / Material Ledger is used to provide actual costs for each material at the end of the period. Materials and their movements are valuated with a standard price during the period. Any variances with respect to this standard are collected in the material ledger when invoices are received or orders settled. During period-end closing, these variances are used to calculate an actual price for the material in the closed period.

*You can use Profitability Analysis (CO-PA) to analyze the profitability of segments in your external market.
*YoucanuseProfit Center Accounting (EC-PCA) to analyze internal profit and loss for profit centers.

*Two methods can be used to compile profitability reports: cost-of-sales accounting and period accounting.

Exercise
*Cost and Revenue Element Accounting provides the structure for assigning CO data by classifying transaction line items according to the type of cost or revenue being posted.

*Cost Center Accounting tracks where costs occur in your organization.Overhead Order Accounting (internal orders) describes the costs of single tasks (holding a trade fair or building a warehouse for example),or current activities (plant maintenance of an administrative building or running and maintenance costs for a vehicle) within a controlling area.

*Activity-Based Costing provides a process-oriented view of the organization. It provides more clarity of the activities provided in your enterprise and the costs involved.

*Product Cost Planning is used to calculate the cost of the production of a material or the provision of a service.
*Cost Object Accounting deals mainly with monitoring the actual production costs and with period-end closing activities that affect production.

*Actual Costing/Material Ledger provides the actual costs for each material at the end of the period.
*Profitability Analysis (CO-PA) enables you to analyze profits and contribution margins for market segments of your company. The objective of CO-PA is to support sales, product management, and corporate-wide planning and decision making, using an external view with a market-oriented perspective.

*Profit Center Accounting enables you to calculate internal measurements of profitability. It portrays the earnings of each profit center in their attempt to meet the planned profitability targets of the enterprise.

3.Integration Within CO and Between CO and Other SAP R/3 Applications

4.Transfer Price Concept in SAP R/3