1. Explain ‘Controlling (CO)’ in SAP.

2. What are the Important ‘Organizational Elements of CO’?

3.What is a ‘Controlling Area’? How is it Related to a Company Code?

4. Outline ‘Company Code—Controlling Area’ Assignments.

5. What are the ‘Components of Controlling’?

6. Why do You Need ‘Cost Element Accounting’?

7. Explain ‘Cost Center Accounting.’

8. What is ‘Product Cost Controlling’ (CO-PC)?

9. What is ‘Profitability Analysis’ (CO-PA)?

10. What is a ‘Cost Object’?


1. Explain ‘Controlling (CO)’ in SAP.

SAP calls managerial accounting ‘Controlling’ and the module is commonly known as ‘CO.’ The CO module is, thus, primarily oriented towards managing and reporting cost/revenue and is mainly used in ‘internal’ decision-making. As with any other module, this module also has configuration set-up and application functionality.

The controlling module focuses on internal users and helps management by providing reports on cost centers, profit centers, contribution margins and profitability, etc.

2. What are the Important ‘Organizational Elements of CO’?

The important organizational structure of controlling includes:

  • Operating Concern (the top-most reporting level for profitability analysis and sales and marketing controlling).
  • Controlling Area (central organization in ‘controlling,’ structuring internal accounting operations).
  • Cost Centers (lower-most organizational units where costs are incurred and transferred).

3.What is a ‘Controlling Area’? How is it Related to a Company Code?

A ‘Controlling Area’ is the central organizational structure in ‘controlling’ (CO) and is used in cost accounting. The controlling area, as in the case of a Company Code, is a self-contained cost accounting entity for internal reporting purposes. The controlling area is assigned to one or more Company Codes to ensure that the necessary transactions, posted in FI, are transferred to controlling for cost accounting processing.

  • One controlling area can be assigned one or more Company Codes.
  • One chart of accounts can be assigned to one or more controlling areas.
  • One or more controlling areas can be assigned to an operating concern.
  • One Client can have one or more controlling areas.

4. Outline ‘Company Code—Controlling Area’ Assignments.

There are two types of assignments possible between the Company Code and a controlling area:

  • One-to-one: Here, one Company Code corresponds to one controlling area.
  • Many-to-one: More than one Company Code is assigned to a single controlling area.

5.  What are the ‘Components of Controlling’?

There are three major submodules in CO and each of these submodules has many components as detailed below:

  • Cost Element Accounting
  • Cost Controlling
  • Cost Center Accounting
  • Internal Orders
  • Activity-Based Costing
  • Product Cost Controlling
  • Profitability Analysis
  • Profit Center Accounting

6. Why do You Need ‘Cost Element Accounting’?

‘Cost Element Accounting’ (CO-OM-CEL) helps you to classify costs/revenues posted to CO. It also provides you the ability to reconcile the costs between FI and CO. CO-OM-CEL provides the structure for assignment of CO data in the form of cost/revenue carriers called cost elements or revenue elements.

7. Explain ‘Cost Center Accounting.’

‘Cost Center Accounting’ deals with the difficult task of managing ‘overheads’ within your organization. Since overhead costs are something that you cannot directly associate with a product or service, which can be difficult to control, cost center accounting provides you with the necessary tools to achieve this.

8. What is ‘Product Cost Controlling’ (CO-PC)?

‘Product Cost Controlling’ (CO-PC) deals with estimating the costs to produce a product/service. CO-PC is divided into two major areas:

  • Cost of materials
  • Cost of processing

With CO-PC, you can calculate:

  • Cost of goods manufactured (COGM)
  • Cost of goods sold (COGS)

CO-PC is tightly integrated with Production Planning (PP) and Materials Management (MM), in addition to FI. The functionality helps to:

  • Calculate Standard Costs of manufactured goods
  • Calculate the Work-in-Progress (WIP)
  • Calculate the Variances, at period-end
  • Finalize settlement of product costs

Note that CO-PC deals only with production costs as it deals only with the production.

9. What is ‘Profitability Analysis’ (CO-PA)?

‘Profitability Analysis’ (CO-PA) helps you determine how profitable (denoted by the ‘contribution margin’) your market segments are. The analysis is on the external side of the market. You will be able to define what segments, such as customer, product, geography, sales organization, etc., of the market are required for analyzing ‘operating results/profits.’ With multi-dimensional ‘drill-down’ capability, you have all the flexibility you need for reporting.

10.  What is a ‘Cost Object’?

A ‘Cost Object,’ also known as a CO Account Assignment Object, in SAP denotes a unit to which you can assign objects. It is something like a repository in which you collect costs, and, if necessary, move the costs from one object to another. All the components of CO have their own cost objects such as cost centers, internal orders, etc.

The cost objects decide the nature of postings as to whether they are real postings or statistical postings. All the objects that are identified as statistical postings are not considered cost objects (for example, profit centers).


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