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Profit Center Accounting

Profit Center Accounting

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Profit Center Accounting

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  1. Profit Center Accounting

  2. Course Objectives • Understand the functions in Profit Center Accounting. • Explain Profitability management in SAP. • Describe and maintain CO-PCA master data. • Identify the source of actual values. • Execute planning. • Use the CO-PCA information system.

  3. Table of contents Course Map Module 1: Overview Module 2: Profitability Management Module 3: Master Data Module 4: Transfer Prices Module 5: Planning Module 6: Actual Data Module 7: Information System

  4. PCA Overview • Profit center accounting, in conjunction with transfer pricing, enables:- • Structuring of the A Group according to Strategic Business Units (SBUs), leading to:Full Income Statements according to lines of business (Product Groups rolled up to SBU/Sectors) • Selected reporting of Balance Sheet items by Product Group/SBU and Sector (e.g. Payables/Receivables, Fixed Assets. Inventories). • The ability to reflect material movements between SBUs at commercial prices rather than cost

  5. Terms used in Profitability Management • Accounting Methods • Period Accounting • Cost-of-Sales Accounting • Values • Gross Sales • Net Sales • Variances • Ratios • Return on Investment • Margins • Economic Profit • Cash Flow • Contribution Margin

  6. CO Module Overview CO EC PA PCA CO CO PC OM Profit Center Accounting How Profitable are Individual areas? Profitability Analysis How profitable are individual market segments? Overhead Cost Controlling Product • How can we reduce our overhead? • Are the responsibility areas working efficiently? • How high are the organisational activity costs? Are they within their budgets? • How can we optimise our internal business processes? Cost Controlling What are the Manufacturing Costs of a product? Overhead Cost Controlling CO What costs occur within the organisation? CEL

  7. CO Components HR SD MM EC - CO Operating concern (9100 – A Grp) Profitability PCA PA segment Profitability Analysis Profitability Analysis CO Product Cost Overhead Cost Controlling OM Controlling Internal Cost centers orders Product Cost Collector Controlling area (9100 – A Grp) Internal Orders Profit Center Accounting Activity types Standard Cost Estimate CO Cost Element Accounting Cost Element Accounting CEL Financial Asset Revenues FI Expense Company Code (9100 A Ltd, 9200 A1 Ltd Accounting Financial Accounting Human Materials Materials Sales and S&D Resources Management Management Distribution

  8. Organisational Units & Master Data Operating Concern A Grp Operating Concern (9100) Controlling Area A Grp Controlling Area (1000) Profit Centers Ethylene Propylene Pharma Polyolefins Power Telecommunication Information technology Corporate common Company Codes A Ltd9100 A1 Ltd 9200 HQ1000 Cost Centers Purchasing 13… Gen Services 14… Sales and Marketing 15… R & T 16… Other Cost Objects Orders Cost Objects

  9. Table of contents Course Map Module 1: Overview Module 2: Profitability Management Module 3: Master Data Module 4: Transfer Prices Module 5: Planning Module 6: Actual Data Module 7: Information System

  10. Responsibility Accounting (Company oriented) Aspects of Profitability Management PCA PA Profitability Analysis By Market segment (Market oriented) Profitability Segments Revenue 2000 Revenue 2000 External Market Discounts 100 Salaries 468 COGS 230 Materials 230 Contr. Margin 1440 Profit Advertising Profit Centers Procurement Production Sales Distribution

  11. EC-PCA CO-PA Characteristics profit center costing-based Aims of Sales and Enterprise profitability profitability controlling accounting controlling Calculation period accounting cost-of-sales of profits and cost-of sales method methods profit-rel. key fig. profit-related balance sheet fig. key figures Key figures Reconciliation posted values posted and with FI imputed values Aspects of Profitability Management

  12. Typical Questions in Profit Center Acctng. Contribution of What is the operating profit for a profit center? organizational unit Return What asset value is attributed to A profit center? on capital Cost Which responsibility areas Exceeded their plan for last month? management Management What goods and services are exchanged within The corporation? of internal sales & services

  13. Responsibility Accounting Accounts Profit Centers Reporting Dimensions Sales Revenue Sales Deductions Cost of Goods Sold Operating Profit Determine and analyze profit, balance Answers and financial ratios by Profit Center Liabilities Accounts Receivables Invested Capital in Assets Profit Inventory ROI Cost of Capital Equity Turnover Return on Sales Return on Investment Economic Profit Invested Capital

  14. A Group Valuation Views Legal Profit Center Group Company 1 A Ltd Company 2 A1 Ltd Company 3 A2 Ltd Profit Center 1 Profit Center 2 • You use valuation views to represent different ways of viewing business transactions in a company. • Legal view (Individual enterprise) – For transactions between company codes. • Group view – For a consolidated view of the corporation. • Profit center view – For business transactions between profit centers.

  15. Parallel Currencies in Profit Center Acctn. EC - EC - PCA PCA Profit Center Accounting Company Special Transaction Code EC - PCA Currency Currency Currency

  16. Table of contents Course Map Module 1: Overview Module 2: Profitability Management Module 3: Master Data Module 4: Transfer Prices Module 5: Planning Module 6: Actual Data Module 7: Information System

  17. Organisational Units & Master Data Operating Concern A Grp Operating Concern (9100) Controlling Area A Grp Controlling Area (1000) Profit Centers Ethylene Propylene Pharma Polyolefins Power Telecommunication Information technology Corporate common Company Codes A Ltd9100 A1 Ltd 9200 HQ1000 Cost Centers Purchasing 13… Gen Services 14… Sales and Marketing 15… R & T 16… Other Cost Objects Orders Cost Objects

  18. Master Data in Profit Center Accounting • Profit Centers • Profit Center Groups • Accounts P&L, Balance Sheet Items • Statistical key figures

  19. Master Data - Profit Center (1) Profit Center Organizational unit in Accounting that reflects a management-oriented structure of the organization for the purpose of internal control. Profit Center groups are collections of Profit centers with similar characteristics. In the case of A Grp this structure is by Product Group.

  20. Master Data – Profit Center (2) Validity Period Company Code Assignment Profit Center Address / Communications Data Basic data

  21. Master Data – Dummy Profit Center Validity Period Indicators: Dummy Profit Center Dummy Profit Center Address / Communications Data Basic data

  22. Collective Master Data Processing Profit Profit Profit Profit Profit Profit Profit Profit Center Center Center Center Center Center Center Center Mass Processing Company Code Company Code Master Data Master Data Assignment Assignment Maintenance Maintenance Comp. Cd1 Comp. Cd2 Profit Center Profit Center Depart Profit Center . Responsible Profit Center . Responsible Ethylene r r Ethylene N.N. XXX r r Styrene Styrene N.N. YYY ..... ..... .....

  23. Accounts in PCA A Grp Chart of Accounts Financial Accounting Financial Accounting 1 2 3 4 8 Revenue Expense Equity Assets Liabilities accounts 1 2 3 4 8 9 Non - Material Current Primary Revenue Secondary opera - inventory financial cost cost elements ting elements elements assets costs, and revenue short - term Controlling Controlling capital Profit Center Accounting Profit Center Accounting

  24. Master Data Groups Cost Elements Profit Centers Activity Types Statistical Key Figures Cost Elements R&T PROD. HOURS Labour : contract Personnel Fertilizers Employees Wages Salaries F1 F2 F3 PHR1 PHR2 Tenured Temps Domestic Foreign

  25. Profit Center Assignments Profitability Profitability Segment Segment Sales order Cost center Cost center Profit Profit Center Center Asset Internal order Internal order Production order Material

  26. Monitoring Assignments Not Check Assignments for: assigned • Materials • Cost Centers • Orders Objects per profit center Profit centers without cost centers Material fast assignment

  27. Table of contents Course Map Module 1: Overview Module 2: Profitability Management Module 3: Master Data Module 4: Transfer Prices Module 5: Planning Module 6: Actual Data Module 7: Information System

  28. Definition of a Transfer Price • A transfer price is a price used to valuate the transfer of goods and services between independent organizational units.

  29. Enterprise Controlling America Europe Middle East Asia Division A USA UK KSA MEX Division B BRA • Legal View – that of independent legal companies • Group View – that of the organization as a whole • Profit center view - that of the decentralized responsibility areas

  30. CO CO PCA PCA FI FI Transfer Prices in SAP Controlling area (Corporate Group) Center (Negotiated prices) Profit Company code (Legal View) Transfer price from the group viewpoint = group production costs Transfer price from the profit center viewpoint = management price Transfer price from the legal viewpoint = sales and purchase price

  31. Transfer Pricing A3 Ltd A Ltd A1 Ltd Company code 9300 Company code 9200 Company code 9100 PrCtr2 PrCtr1 PrCtr2 PrCtr3 CCtr 10 CCtr 20 PrCtr3 L 80 L 120 100 +5 G 80 G 100 85 P 85 P 120 L 70 L 220 220 L 120 L 80 L 70 L 100 G 70 G 100 G 100 G 80 G 70 220 G 100 P 220 P 120 P 70 P 85 P 70 P 85 Assumed Plan = Actual => No Variances Butene-1 Ethylene Polyethylene Polyethylene Butene-1

  32. Transfer prices in PCA Transfer price Profit Center 1 Profit Center 2 120 PCA Production Material order 120 FI/CO Parallel value flows Logistics Quantity flow

  33. Table of contents Course Map Module 1: Overview Module 2: Profitability Management Module 3: Master Data Module 4: Transfer Prices Module 5: Planning Module 6: Actual Data Module 7: Information System

  34. Profit Center Planning Objectives • Plan Integration • Planning Methods • Plan Data Transfer

  35. Microsoft Excel Cost Internal Center Order Plan Integration Profit Center Plan Profit Center Plan Sales 100,000 Discounts 5,000 Cost of Sales 50,000 Marketing Expenses 10,000 Admin. Expenses 15,000 Number of Sales Orders 1,000 …. CO ProductionOrder

  36. Excel - Upload Copy existing data New Plan Final Plan Planning methods in PCA Plan data transfer Manual entry Plan Allocations

  37. Plan Data Transfer Plan Profit Center Cost Center On - line Plan Data Transfer Revenue 100,000 AND/OR Marketing 50,000 Internal / Subsequent Postings Admin 10,000 CO Production Order …. ….

  38. Table of contents Course Map Module 1: Overview Module 2: Profitability Management Module 3: Master Data Module 4: Transfer Prices Module 5: Planning Module 6: Actual Data Module 7: Information System

  39. Actual Values Overview • Flow of Actuals in Profit Center Accounting • Overview • Flow from Profit and Loss accounts • Flow from materials management • Flow from sales and distribution • Flow from Balance Sheet items – Period end closing • Flow from Asset Management • Transfer of Material Stock • Transfer of Work In Process • Flow from Accounts payable and receivable • Flow from controlling – Period end closing • Flow from Overhead Cost Management • Profit Center Document Entry • Assessment & Distribution

  40. Actual Values Overview • Flow of Actuals in Profit Center Accounting • Overview • Flow from Profit and Loss accounts • Flow from materials management • Flow from sales and distribution • Flow from Balance Sheet items – Period end closing • Flow from Asset Management • Transfer of Material Stock • Transfer of Work In Process • Flow from Accounts payable and receivable • Flow from controlling – Period end closing • Flow from Overhead Cost Management • Profit Center Document Entry • Assessment & Distribution

  41. EC - EC - PCA PCA FI FI CO - CO - CO - CO - PA PA OM OM CO - CO - PC PC Overview of Value Flow in PCA Profit Center Accounting V V A A L L U U E E E Primary Costs F F L L O O W W Goods Business Sales/ Billing Procurement Movement Production process MM PP MM SD

  42. Actual Values Overview • Flow of Actuals in Profit Center Accounting • Overview • Flow from Profit and Loss accounts • Flow from materials management • Flow from sales and distribution • Flow from Balance Sheet items – Period end closing • Flow from Asset Management • Transfer of Material Stock • Transfer of Work In Process • Flow from Accounts payable and receivable • Flow from controlling – Period end closing • Flow from Overhead Cost Management • Profit Center Document Entry • Assessment & Distribution

  43. Profit Center Material/Plant of Sales Order Substitution Material/Plant of Purchase Order Material/Plant Indirect /Manual Assignment Customized Automatic Account Assignment Determination of Profit Centers in P&L Source Transaction Billing Document Billing Document Invoice Receipt Invoice Receipt Goods Movement Goods Movement Direct Posting from FI Direct Posting from FI Other P&L Accounts Other P&L Accounts

  44. EC - EC - PCA PCA V V A A L L U U FI FI CO - F CO - F PC PC L L O O W W Business process MM PP MM PP Flow from materials management (1) Material Expense 400000 500 Material Expense 400000 E 500 Raw Materials119400 Material Expense 500 500 Consumption Production Order

  45. EC - EC - PCA PCA CO - CO - PC PC PP MM PP MM Flow from materials management (2) Production Output462001 M. Expense 500 450 V V A A L L U U Finished Products119430 E FI FI F 450 F L L Production Output462001 O O W W Production Output - 450 450 Delivery to Stock Business Production Order process

  46. EC - EC - PCA PCA FI FI Flow from sales and distribution (1) V V A A L L U U Inventory - Finished Product (FG) 119430 E Stock F F 6,028.50- L L O O W W Cost of Goods Sold 462002 Change Stock 6,028.50 Business Goods Issue process MM

  47. EC - EC - PCA PCA FI FI Sales 810000 10,000 SD SD Flow from sales and distribution (2) Sales 810000 V V 10,000 A A L L U U E Receivables … F F 10,000 L L O O W W Business Sales/ Billing process

  48. Actual Values Overview • Flow of Actuals in Profit Center Accounting • Overview • Flow from Profit and Loss accounts • Flow from materials management • Flow from sales and distribution • Flow from Balance Sheet items – Period end closing • Flow from Asset Management • Transfer of Material Stock • Transfer of Work In Process • Flow from Accounts payable and receivable • Flow from controlling – Period end closing • Flow from Overhead Cost Management • Profit Center Document Entry • Assessment & Distribution

  49. Profit Center Cost Center/ Internal Order Assets Assets Assignment of Asset Material/Plant Inventory Values Inventory Values Material/Plant Account Accounts Receivable Accounts Receivable Assignment of Accounts Payable Accounts Payable Sales order / Purchase Order Other Balance Sheet Items Other Balance Sheet Items Customizing Automatic Account Assignment Determination of Profit Center for B/Sheet Source Transaction

  50. Building Assets EC - EC - PCA PCA 100 FI FI Flow from Asset management V V A A L L U U E On - line Periodic Transfer Building Assets F F L L 100 O O W W Business Period End Closing : Transaction Processing : Transfer of Asset process Acquisition of Asset Values