SAP Controlling 

Controlling module provide information to management for planning, reporting and monitoring of business operations. Controlling and Finance are independent modules in SAP. Data flows between Finance and Controlling module on real time basis. Cost Element provides the integration point between Controlling and Finance. A cost element can be an expense or revenue item. SAP Controlling will be covered in below tutorials:

• Cost Element Accounting
• Cost Center Accounting 
• Internal Orders
• Product Costing
• Profit Center Accounting
• CO-PA (Controlling and Profitability analysis)

Cost Center

A cost center can be a department like Administration department, Finance Department, Marketing department etc.

A cost center collects and redistribute cost to other departments. Each cost center has a planned cost, Actual cost and their Variance

Key benefits of Cost Center Accounting:

• Managers can set budget for the cost centers
• Cost Planning for the Cost Centers
• Cost Centers collect cost and then this cost can be redistributed to other cost centers on specified rules. For e.g. Maintenance Cost center cost can be distributed to Production, administration and other cost centers who used services of maintenance cost center

Standard Cost

• A standard cost is the estimated cost to produce a product
• Standard cost is fixed for a period
• Standard cost for a product is calculated in transaction CK40N

Planned Cost

• A planned cost is the estimated cost for completion of a job order. A standard cost is for specific unit of product, whereas planned cost is for a job order.
• Planned cost for a production order is calculated in CO01
• Actual cost for completion of Production order is calculated in CO01 / CO02

Organization Structure

Controlling Area

The controlling area is an organizational unit in Accounting used to subdivide the business organization from a cost accounting standpoint.

It records and analyze cost element, cost center accounting, internal order, manufacturing related activities (Product costing), and internal unit activities in Profit center accounting

Can assign n number of company codes to a controlling area if below conditions are satisfied

• Chart of accounts is same between company codes and controlling area
• Fiscal year between companies’ codes have same number of posting periods (other than special posting periods)
• Start and end period is same (Jan-Dec, Apr-Mar) for all fiscal years
• Start and end date is same for all fiscal years

Operating Concern

• Can assign one or more controlling area to one operating concern

Leading and Non-Leading Ledger

• Only leading ledger integrates with controlling area.
• Non-Leading ledger does not integrate with controlling area

Create Controlling Area

Transaction code to set controlling area: OKKS

Transaction code to create Controlling area: OKKP

• CoCd->CO Area : Cross company code is used when multiple company codes use same controlling area
• Currency type:  20- controlling area currency, 30 – Group currency. Only these two currency types should be used for cross company codes
• Chart of accounts: Use operating chart of accounts of the companies
• Fiscal year variant: Use company code Fiscal year variant
• Cost Center Standard hierarchy: This field is mandatory. Value defined here is the highest node in cost center hierarchy

Assign Controlling area to Company codes

Activate below components

• Cost center
• Select Activity type: This allows analyze of labor activity
• Order management; Production order, Process order, Service order
• Commitment Management
• Profitability analysis is implemented when CO-PA is activated
• Profit Center accounting: Required to activate for classic GL. Not required for new GL as part of finance
• Projects
• Cost Objects
• Variance
• All currencies
• Company code validation: Applies only to cross-company-code cost controlling and to postings from external accounting. E.g.: A procurement order made for a cost center in another company code is possible only if the indicator is inactive.

Controlling area Number Range

Transaction Code: KANK

In Finance Document types are assigned to number ranges

In controlling CO document are saved are Business transaction types

E.g. of Business Transaction types are

• KAUS: Calculate Scrap
• KAMV: Manual cost allocation

CO number range is assigned to business transaction type

Procedure: Click the create button. Now create the Group say Primary posting and create number range for this group say 1 to 199999. Now come back to the previous screen. Select the unassigned business transaction. Click button Element, select the group created earlier. This business transaction get assigned to the group and get’s the number range of the group

Group	Number Range
Primary	100000-200000
Secondary	200001-400000
Planning	400001-600000

Controlling Versions

Controlling data is stored in versions

Default version is zero. Version zero is used for both actual and planning. Other versions are used only for planning

IMG Path: SPRO-Controlling – General controlling – Organization – Maintain versions

Select General version – Select version 0 – Controlling area settings – Select year to be activated – Settings for each fiscal year

Click Price calculation

• Plan Method: Average Price
• Actual Method: Period Price

Cost Element Accounting

Cost elements are cost carrier between cost objects. A cost element can be represented either as cost or revenue. There are two types of cost elements, Primary and Secondary

• Primary Cost Element
  • Main integration between FI and CO. Values flow from FI to CO through primary CE
  • All income and expense accounts can be created as a primary CE
  • GL accounts for WIP and production variance are not created as primary CE. These are calculated in CO. They flow from CO to FI

• Secondary Cost Element
  • These are not represented by GL accounts
  • They exist only in controlling
  • They are used for below purpose
    • Transfer cost between cost objects
    • Apply direct / Indirect OH to product cost
    • Transfer values from cost center to CO-PA

Cost Element Categories

Cost element categories classify primary and secondary cost elements. They determine the transactions with which you can use the cost element, such as internal settlement or allocation. The cost element category determines whether you can post to a cost element directly or indirectly:

• Direct posting: You post a fixed amount to an account by specifying the account number. You can post directly to all primary cost elements.
• Indirect posting: The account is determined automatically at the time of posting. Indirect posting is only possible for secondary cost elements.

Various Cost Element Categories:

• 01 Primary Cost Element: These are used for expense GL accounts other than sales deductions
• 12 Sales deductions: This cost comes from Sales and Distribution (VKOA). This cost flows to CO-PA. Category 01 cannot transfer cost from SD to COPA
• 22 External Settlement
  • Move cost from CO to FI
  • Transfer Internal order cost from CO to FI
• 11 Revenue : These are used for Sales / Revenue GL accounts
• 21 Internal settlement: Used to settle Service order to cost objects ( Cost center, Internal order, Production Orders, Sales Order)
• 31 WIP / RA
  • Used in Product costing. Required for calculation of WIP (Work In Progress) / RA (Result Analysis)
  • For WIP there are two accounts. WIP B/S account and WIP P/L account
  • Period 6 WIP BS account is DR and WIP P/L account is Credited. Period 7 (Next period) beginning WIP P/L account is DR and WIP BS account is CR.
•  41 Indirect OH
  • FI cost is of two types direct cost and indirect cost. Direct cost like material is traceable to the product. Indirect cost like administrative expenses are not directly traceable to the product. Client can provide a % of material cost, say 10%, which can be assigned as Indirect OH to the product
• 42 Assessment CE Category
  • Used to transfer values from Cost center to CO-PA. E.g. transfer marketing department cost to COPA
  • Transfer cost from one cost center to another cost center
• 43 Activity Cost Element (Direct OH)
  • Used to transfer Cost center cost to product based on time spent on job. E.g. Labor activity cost, Assembling cost

Codification

Primary Cost Element

• Create Primary Cost Element: KA01/KA02 /KA03 in CO
• Create Primary CE automatically in Controlling: OKB2-OKB3-SM35
• Create Primary CE in FI: FS00

Secondary Cost Element

• Create Secondary Cost Element in Controlling: KA06

List / Display Cost Element

Transaction code : KA23

Primary Cost Element

Secondary CE	Name	CE Category
942000	canteen assessment cost element (distribution is based on number of employees)	42: Assessment
941000	material indirect overheads cost element (depreciation based on % of material cost)	41: OH
943000	production dept depreciation direct overheads cost element (for depreciation based on machine hour rate)	43: activity allocation/machine hr.
943001	employee cost or labor direct OH cost element (for salaries & canteen dept’s distributed cost of production department costs based on labor hour rate)	43: activity allocation/labor hr.
942001	material assessment OH cost element (based on revenues ratio)	42: Assessment
942002	marketing assessment OH cost element (based on revenues ratio) (All these are secondary cost elements)	42: Assessment

Cost Element Numbering rules can be like one shown below:

• 9: Starting Number
• 41 / 42/43: CE Category
• 000/002: Sequence number

Cost Element Group

Cost Element Group is an organizational unit storing a group of cost elements. Any number of cost element groups can be defined as part of master data maintenance for valuation, planning and allocation purposes in Cost Element Accounting or Cost Center Accounting. It is used for reporting purpose

Transaction Code: KAH1 / KAH2 / KAH3

Menu Path: Accounting – Controlling – Cost Center Accounting – Master Data – Cost Element Group – KAH1-Create

SAP Controlling Video Tutorial : For detailed, step-by-step instructions on SAP Controlling overview, follow along with my video tutorial below.