CO PCA

Profit Center Accounting is a tool for management to assist them in making strategic management decisions. The concept is to allow a closer review of small portions of the overall agency in order to evaluate how each of these segments is performing. Using the knowledge gained from this tool, resources, especially personnel, can be optimally allocated among the centers. Profit centers may also stimulate healthy competition between each unit.  

Profit Center Accounting (EC‑PCA) lets you determine profits and losses by profit center using either period accounting or the cost‑of‑sales approach. It also lets you analyze fixed capital and so‑called “statistical key figures” (number of employees, square meters, and so on) by profit center. Consequently, you can calculate all key figures commonly used in cost accounting (return on investment, cash flow, sales per employee, and so on).

A profit center is a management‑oriented organizational unit used for internal controlling purposes. Dividing your company up into profit centers allows you to analyze areas of responsibility and to delegate responsibility to decentralized units, thus treating them as “companies within the company”. 

The essential difference between a profit center and a business area is that profit centers are used for internal control, while business areas are more geared toward an external viewpoint.

The profit center differs from a cost center in that cost centers merely represent the units in which capacity costs arise, whereas the person in charge of the profit center is responsible for its balance of costs and revenues.

Integration

EC-PCA is a part of the Enterprise Controlling (EC) module and is integrated with new General Ledger Accounting (FI-GL).

Features

The main aim of Profit Center Accounting is to determine profit for internal areas of responsibility. It lets you determine profits and losses using either period accounting or the cost-of-sales approach.

By assigning balance sheet items (asset portfolio, payables and receivables, material stocks, work in process) to profit centers, you can analyze your fixed assets by profit center, thus using them as investment centers. This makes it possible to expand profit centers to investment centers. This also makes it possible for you to analyze a number of key figures by profit center, including return on investment, working capital and cash flow.

EC‑PCA lets you set up your profit centers according to product (product lines, divisions), geographical factors (regions, offices or production sites) or function (production, sales). You need to make the settings in Basic Functions to divide the company into internal areas of responsibility. You divide you business into profit centers by assigning the profit centers to the various master data that is relevant for profits (materials, cost centers, orders, projects, sales orders, assets, cost objects and profitability segments). This lets you set up Profit Center Accounting in a way that meets your company’s requirements regardless of what sector of industry your company is in (machinery, chemicals, services, and so on) or what form of manufacturing you employ (repetitive manufacturing, make‑to‑order production, continuous flow production).

Every profit center is assigned to the organizational unit Controlling area. The profit centers in a company code belong to a standard profit center hierarchy that is also assigned to the controlling area. 

All profit‑relevant business transactions are updated in the profit center hierarchy according to G/L account at the same time they are processed in the original module of the SAP system. This ensures that the entire flow of goods and services within a company is transformed in goods and services relationships between profit centers. This is true both with actual postings and in planning.

You can also transfer the balances and balance changes of certain balance sheet accounts to profit centers in real time or periodically.

Goods movements between profit centers can be valuated either at external prices, group‑internal prices or specially defined transfer prices. For more information, see Parallel Valuation Approaches/Transfer Prices.

The Information System provides a user-friendly tool for evaluating your plan and actual data. Because results are stored by G/L account, you can reconcile the data with data in Financial Accounting at the cost element level. The reports contained in the standard SAP system represent a simple information system for analyzing areas of responsibility. In addition, different tools are available which let you create your own reports to further meet the needs of our company.

In SAP, a Profit Center is a “bucket” where revenues can be posted and costs can be assigned, planned and reported on.

Each revenue-producing location will be represented by a profit center.

For AOI purposes, a profit center is an origin of tobacco and a profit center group is a group of profit centers/origins, such as a region.

All revenue postings require a profit center.

All cost centers are associated to a profit center to allow for reporting such as a profit and loss statement for a specific location.

Profit centers are not company code-specific.

Profit centers are assigned to the AOI Inc. Controlling Area (CAOI), which is the main Controlling organizational unit and the only Controlling area AOI will have.

Profit Center Accounting Profit Center Accounting enables internal profit to be calculated for profit centers. It generates a balanced and complete Balance Sheet and Profit and Loss Statement for each Profit Center.

It also compares the overall period costs of the company or profit center with the revenues and internal activities for the same period.

It allows real-time evaluations, reporting and analysis on posted plan and actual data.

AOI manages its business on an operational basis as well as a financial basis. Profit center accounting is how management can monitor its business operationally.

Profit centers can be assigned to alternative hierarchical structures which are completely independent of the standard hierarchy. These structures are called profit center groups. Profit center groups represent a flexible view of the standard hierarchy and are used for reporting, planning and allocations.

The standard hierarchy is a special type of profit center group. It is a tree structure which contains all profit centers in a controlling area and reflects the organizational structure used in Profit Center Accounting. The Standard Hierarchy AOI accounts for all profit centers and is an entity to which all profit centers must be attached upon creation.

The master data of a profit center includes the name of the PC, the controlling area it is assigned to, and the profit center’s period of validity, as well as information about the person responsible for the profit center, the profit center’s assignment to a node of the standard hierarchy, and data required for communication (address, telephone number and so on). 

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