Define Profit Center

Define Profit Center:

A cost center is utilized for cost analysis, whereas a profit center is employed for both revenue and cost analysis.

This distinction aids in the preparation of comprehensive income statements and balance sheets for various business segments. A profit center can be established in any area where analysis is desired, and it requires specific reporting criteria and a trial balance. Additionally, it serves as a point for revenue generation and necessitates segmental reporting.

To implement responsibility accounting effectively, it is essential to define profit centers. Data is transferred from other components such as the material master, cost center, and asset master to the profit center.

Menu Path:

SPRO-SAP Reference IMG-Controlling-Profit center accounting-Basic settings-controlling area settings-Maintain controlling area settings



Transaction code:

OKE5



Choose the controlling area KK02 that we have already established and then click on the checkmark icon.



Fill the highlighted fields:

To begin, you must input the name of the standard hierarchy for the profit center master data. The system will automatically generate the standard hierarchy upon saving.

1. Standard Hierarchy : Your choice (Kumar10)

You can subsequently manage it by navigating to Master data -> Standard hierarchy in the Customizing section.

2. Elm. of. Int. Business vol. : Tick as shown in the figure.

The checkbox for Eliminating Internal Business allows you to remove internal business volume within your controlling area. When this option is selected, the system will refrain from updating transaction data between objects that are linked to the same profit center in account-based EC-PCA.

3. Profit center local currency type : 20 (choose anyone)

You have the option to select from the following currencies: the group currency (30), the controlling area currency (20), or a special profit center currency that you can specify (90). If you opt for the last choice, please ensure to input that currency in the subsequent field.

4. Profit center local currency : INR

In the Currency type field, specify the currency you wish to utilize for the special profit center report. This currency will be employed by the system in various standard reports that present data in this specified currency.

5. Control Indicators : Active this.

This indicator enables Profit Center Accounting within the controlling area starting from the designated fiscal year.

It allows other components to readily determine if they are required to engage in activities related to Profit Center Accounting. If the flag is not activated, no data will be recorded in Profit Center Accounting.

Please click the save button.

Click the back button.

Profit Center Group : Kumar10 has been established.

We make it this one as standard profit center group.

Now,

We need to create new profit center group for training purpose.

SAP Menu-Accounting-controlling-profit center accounting-master data-profit center group-create



Transaction code:

KCH1



Already we created a profit center group and for understanding purpose and need to show the hierarchy. We are going to create,

1.Profit center group

2.Profit center

Double click on the profit center group



Select Yes,



Select the hierarchy icon marked in the above image,



Select the lower level hierarchy icon as marked in the above image,



Give profit center group name and description on your choice,

We given Engine as profit center group and piston as description name.

Click the save button.




Click the back button.

Profit Center Group : Engine has been established.

Now,

We need to create profit center,

SAP Menu-Accounting-controlling-profit center accounting-master data-profit center-Create



Transaction code:

KE51



Give profit center name on your choice and check the controlling area and press enter.



Fill the highlighted fields as shown in the above image,

Click the activate icon as shown in the top left side image.



Profit center : Kumar20 has been established.

Click the back button.

If you need to check the hierarchy, please follow the below steps

SAP Menu-Accounting-controlling-profit center accounting-master data-Standard Hierarchy-Display



Transaction code:

KCH6N



Choose the controlling area KK02 that we have already established and then click on the checkmark icon.



Profit Center Group and Description Name

1. Kumar10 and KSN Motors

This was created initially.

Next,

Profit Center Group and Description Name

2. Engine and Piston

I assigned the description name "Piston" and modified it to "KSN Motors" using the edit icon located in the top left corner near the object manager, as indicated in the image.

Similarly, for Profit Center: Kumar20, the description name is "Piston", which was also updated to "KSN Motors".

Thus,

Profit Center Group:

Kumar10, Engine: KSN Motors

Profit Center:

Kumar20: KSN Motors has been established.