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How to assign Cost Centers to Profit Center in SAP

Scott Livingston

In this tutorial, we will learn Cost Centers to Profit Center in SAP

Steps to Assign Cost Centers to Profit Center

Step 1) Enter Transaction Code SPRO in the SAP Command Field

Assign Cost Centers to Profit Center

Step 2) In the next screen, Select ‘SAP Reference IMG’

Assign Cost Centers to Profit Center

Step 3) In the next screen , ‘Display IMG’ Follow the menu path Controlling->Profit Center Accounting -> Assignments of Account Assignment Objects to Profit Center ->Assign Cost Centers

Assign Cost Centers to Profit Center

Step 4) In the next screen, Enter the cost center to be assigned to a profit center

Assign Cost Centers to Profit Center

Step 5) In the next screen , Enter the profit center to which the cost center is assigned

Assign Cost Centers to Profit Center

Step 6) Press ‘Save’ button from the SAP Standard toolbar, for the saving the changes.

Assign Cost Centers to Profit Center

  • How to create a new COST CENTER: SAP KS01
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  • Settlement of Internal Orders Tutorial: KO02 & KO88 in SAP
  • SAP Profit Center Tutorial: Create, Group, Posting & Planning
  • Creation Of Profit Center using Standard Hierarchy in SAP
  • How to assign material master to Profit Center in SAP
  • SAP CO Tables: Important Tables in Controlling Module
  • Cost Center and Profit Center in SAP: What is the Difference?
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Profit Center Accounting Basics in SAP S/4HANA Finance

SAP PRESS

In this blog post, we’ll walk you through some profit center accounting basics in SAP S/4HANA, such as the concepts, roles, and requirements for profit center accounting in your business.

We’ll discuss methods, such as the cost of sales method and the period accounting method, for calculating profits. Furthermore, you’ll learn about profit center accounting through profitability analysis and the account assignment objects you can use for profit centers.

Concepts, Roles, and Requirements

Classic profit center accounting is account based. As a result, values are updated in a profit center based on the individual general ledger accounts from the operational chart of accounts assigned to the company code . The general ledger account is assigned to an account type, such as a balance sheet account, nonoperating expenses or income account, primary costs or revenue account, or secondary costs account. These account types determine the usage of each general ledger account in financial accounting and controlling. In SAP S/4HANA Finance , profit centers are derived from various account assignment objects.

Splitting an organization into profit centers helps you analyze areas of responsibility and effectively assign these areas of responsibility to profit centers. Profit center accounting helps you analyze the costs, profits, balances, and key financial figures for each profit center and helps you understand internal aspects of profitability. This approach essentially reflects the success of each profit center in achieving its profitability goals. Profit center accounting determines profits and losses by region (e.g., plants, geographical locations, etc.); by function (e.g., manufacturing, sales, retail, etc.); or by product. The document splitting functionality helps generate balance sheet reports at the profit center level.

In SAP S/4HANA , profit center accounting is mapped in the Universal Journal by default. This mapping populates profit centers on line items in the Universal Journal. To make this work, you must activate profit center accounting in the Universal Journal by following the IMG menu path Financial Accounting > General Ledger Accounting > Master Data > Profit Center > Activate Profit Center Accounting in Controlling Area . This step opens the Change View “Activate PrCtr Accounting”: Overview screen, shown in this figure.

Activating Profit Center Accounting in SAP S/4HANA

On this screen, select the ProfitCtr Acctg (profit center accounting) checkbox (1) for the controlling area given in the CO Area column (2). The year shown in the Fiscal Year column (3) represents the start of validity for the controlling area. Click the Save button (4) to activate profit center accounting. As soon as you activate profit center accounting, the system activates some additional validation areas in the background. For example, the system performs profit center consistency checks when posting line items with account assignment objects, such as a cost center or an internal order. The activation of profit center accounting sets the PCRCH field in table TKA00 (5) to the value 2 (6). After the field is set to 2 ( Account Based Profit Center Accounting is active ) (7), if a posting is made with the profit center or a partner profit center in the line items, the system checks for this profit center (or partner profit center) and updates both in the Universal Journal. SAP doesn’t support profit center accounting across controlling areas; therefore, profit center accounting works only within one controlling area. To support the transition to SAP S/4HANA (on-premise), you can activate classic profit center accounting in SAP S/4HANA. See SAP Note 702854 for instructions on activating or deactivating classic profit center accounting to use profit center accounting in SAP S/4HANA instead.

Methods of Profit Calculation

In this section, we’ll provide a general overview of the methods used to calculate the profit and loss (P&L) for a profit center in SAP S/4HANA. Profit centers reflect the management-oriented structure of your organization and are used for internal control. The performance of each profit center is measured from the operating results of the profit center. You can calculate operating results (P&L) using either of the following methods. Both methods generate the same results.  

Cost of Sales Method

The cost of sales method compares sales revenues to the cost of sales. The cost of sales includes costs or expenses incurred for the generation of sales. The table below shows the income statement you would prepare in the cost of sales method.

Income Statement under the Cost of Sales Method

Sales for the period are directly linked to the production costs of sales, and you can’t see the change in inventory in the financial statement. These costs and expenses are economic values for the resources used in generating sales and may include costs from the previous period. These resources are determined based on functional areas, such as production, research and development, management, and sales and distribution. In SAP S/4HANA, functional areas are derived from controlling objects, such as cost center, profit center, internal order, work breakdown structure (WBS), and product cost collector. The production cost includes proportional costs and structural costs accrued from production. Variances for the period represent the proportional and structural costs included in the production cost for the period.  

Period Accounting Method

The period accounting method compares market-driven sales for the period to the total expenditures—that is, the value of the actual goods and services consumed for the generation of sales—for the same period. Therefore, in this method, differences in cost arise because the quantity sold is not the same as quantity produced. This difference represents a change in inventory for work in process (WIP), semi-finished goods, and finished goods. The following table shows an income statement you would prepare in the period accounting method.

Income Statement under the Period Accounting Method

Profit Center Accounting with Profitability Analysis

SAP S/4HANA provides profitability analysis and profit center accounting as key accounting tools to analyze your organization’s profit and progress. Profitability analysis evaluates the performance of your organization and provides market-driven information to managers responsible for decision-making. This information is derived from segments (e.g., products, locations, customers, etc.) and internal organizational units (e.g., company codes, business areas, etc.). Profit center accounting in SAP S/4HANA evaluates the performance of specific internal areas or units of the organization set up as profit centers, which are created based on product, location, or function. Document splitting generates data for balance sheet reporting at the profit center level. The assignment of segment accounting objects to a profit center generates information for segment reporting and fulfills legal requirements codified in International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) in the US.

Profitability analysis provides results for planning and decision-making at the organization level, which helps in defining profitability segments and analyzing the performance of these segments. Profit centers are management-oriented organizational units used for internal control. Splitting your organization into profit centers helps you analyze areas of responsibilities and assign responsibilities to each profit center.

Profit Center Assignments

Costs and revenues are posted to various account assignment objects such as internal orders, cost centers, fixed assets, and so on. You can assign profit centers to these account assignment objects. These assignments help the system determine profit centers for the line items posted for objects, such as internal orders, cost centers, and so on. The assignment determines the transfer of balance sheet items to the individual profit centers, and you don’t need to post values directly to the profit centers.

Editor’s note: This post has been adapted from a section of the book General Ledger Accounting with SAP S/4HANA by Anand Seetharaju and Mayank Sharma.

Recommendation

General Ledger Accounting with SAP S/4HANA

The general ledger is the backbone of your financials system. Learn everything you need for configuring and using the general ledger in SAP S/4HANA. Walk step by step through setting up fiscal years, posting periods, parallel ledgers, and more. See routine processes like posting, document control, and year-end closing in action. Whether you’re planning a new implementation or a system conversion, this is your complete guide to general ledger accounting in SAP S/4HANA!

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TutorialsCampus

In this topic, we described about the below sections -

  • Technical details

Assigning cost centers to profit center in an organization to reflect all the primary costs from Financial Accounting and all secondary allocations to profit centers in Cost Center Accounting. Assigning a cost center to profit center, it assigns all the cost center assets to the profit center.

Step-1:- Go to SPRO .

Assigning Cost Centers to Profit Center

Step-2:- Click on SAP Reference IMG button to proceed.

Assigning Cost Centers to Profit Center

Step-3:- Navigate to SAP Customizing Implementation Guide → Controlling → Profit Center Accounting → Assignments of Account Assignment objects to Profit Center → Assign Cost Centers and click on execute to assign Cost Center to profit center.

Assigning Cost Centers to Profit Center

Step-4:- Enter the Cost Center and click on Enter .

Assigning Cost Centers to Profit Center

Step-5:- In the next screen, enter the profit center to which cost center is assigned.

Assigning Cost Centers to Profit Center

Step-6:- Click the save icon at the top to save the cost center to profit center assignment.

Assigning Cost Centers to Profit Center

Technical details -

  • Transaction: n/a
  • Menu Path: SPRO → SAP Reference IMG → SAP Customizing Implementation Guide → Controlling → Profit Center Accounting → Assignments of Account Assignment objects to Profit Center → Assign Cost Centers

SAP CCA Tutorial

  • SAP CCA Tutorial
  • SAP CCA - Home
  • SAP CCA - Overview
  • SAP CCA - Activity Types
  • SAP CCA - Master Data
  • SAP CCA - Cost Center Groups
  • SAP CCA - Creating a Cost Center
  • SAP CCA - Cost Center Posting
  • SAP CCA - Linking Order Reason
  • SAP CCA - Internal Order
  • SAP CCA - Settlement of IO
  • SAP CCA - Profit Center
  • SAP CCA - Postings to Profit Center
  • Profit Center Standard Hierarchy
  • Assignment of Cost to Profit Centers
  • Assigning Materials to Profit Center
  • SAP CCA - Compare CO, PC, IO
  • SAP CCA - Planning
  • SAP CCA - Period-End Closing
  • SAP CCA - Accrual Calculation
  • SAP CCA - Schedule Manager
  • SAP CCA - Variance Calculation
  • SAP CCA - Year-End Closing
  • SAP CCA - Product Costing
  • SAP CCA - Profitability Analysis
  • SAP CCA - Information System
  • SAP CCA - Standard Reports
  • SAP CCA - Important Tables
  • SAP CCA - Job Responsibilities
  • SAP CCA - Useful Resources
  • SAP CCA - Questions Answers
  • SAP CCA - Quick Guide
  • SAP CCA - Discussion
  • Selected Reading
  • UPSC IAS Exams Notes
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Assignment of Cost Centers to Profit Center

You can assign cost centers to profit center in an organization to reflect all the primary costs from Financial Accounting and all secondary allocations to profit centers in Cost Center Accounting.

When you assign a cost center to profit center, you assign all the assets of cost center to the profit center.

Step 1 − To assign Cost Center to profit center, navigate to SPRO → SAP Reference IMG → Controlling → Profit Center Accounting → Assignments of Account Assignment objects to Profit Center → Assign Cost Centers → Execute.

Profit Center Accounting

Step 2 − Enter the Cost center to be assigned to Profit center.

Cost Center

Step 3 − In the next screen, enter the profit center to which cost center is assigned and click the save icon at the top.

Cost Center Assigned

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cost center assignment to profit center in sap

SAP Profit Center 101: Improving Profitability Across Systems

Home > Insights > SAP Profit Center 101: Improving Profitability Across Systems

The SAP Profit Center is a pivotal component within the SAP Controlling module that empowers organizations to manage and analyze their financial performance strategically and improve profitability across the entire organization.

And, in an era where businesses navigate intricate financial landscapes, SAP Profit Center functionality emerges as an indispensable tool, offering unparalleled insights into cost distribution, revenue generation, overall profitability, and more.

This article discusses the key components and capabilities of SAP Profit Center, how it catalyzes informed decision-making for businesses aiming to thrive in today’s competitive markets, and where our team of senior-level SAP consultants can fit in your organization.

Read on to learn more!

What is Profit Center Accounting in SAP?

A profit center refers to an organizational unit in financial accounting designed to reflect an organization’s management-oriented structure and facilitate more effective internal control functions.

By leveraging Profit Center Accounting in SAP, organizations can design profit center hierarchies, assign each profit center to a specific hierarchy, and derive the profit center automatically for greater internal control and consistency across teams and departments.

With profit centers in SAP, each Profit Center head and their related teams can leverage both the cost-of-sales or period accounting approach to analyze profit and operating results and conduct profitability analysis for all logistical activities and other relevant allocations across the company.

Understanding SAP Profit Center Structure

Each profit center is assigned to a corresponding controlling area organizational unit to ensure general ledger accounting values are displayed correctly across the Profit Center Accounting solution.

Profit centers must also be assigned to the profit center standard hierarchy by indicating the profit center group it belong to, making it easier to maintain relevant profit center segments and activate the profit center during posting.

The master data structure in the SAP Profit Center is comprised of the following:

  • Name of the profit center
  • Assigned control center
  • Period of validity for the profit center
  • Employees responsible for the profit center
  • Assignment to each node of the standard hierarchy
  • Data required for communication across the profit center

Profit center master data is only valid for a specific period of time, eliminating complicated activities related to a new fiscal year, allowing users to enter future changes to the master data in advance, and simplifying the process of changing information in the master data record. With this structure, business users can only aggregate data that share the same currency, the same chart of accounts, and the same fiscal year variant.

And, for more information about how SAP Launchpad Support can enhance operations across the Profit Center and beyond, click here.

Key Features of the Profit Center in SAP

The SAP Profit Center offers advanced features and capabilities intended to improve internal controlling processes, segment a company into different profit centers, and facilitate better analysis and delegation of responsibilities to specific decentralized units across the organization.

Here are a few of the main features of Profit Center Accounting in SAP:

1) Business Transactions

Profit centers in SAP allow users to process and organize all business transactions in the SAP S/4HANA system according to their associated cost and revenue elements.

This profit center structure applies to actual postings and profit center data, transforming the flow of goods and services within the company into the exchange of goods and services between profit centers.

2) Organizational Unit

The SAP Profit Center represents an organizational sub-unit that operates independently and assumes responsibility for its own costs and revenues. Profit centers are created to organize internal company operations by assigning the master data of each profit-relevant object to the related profit center.

Master data assignment to relevant profit centers includes the following:

  • Cost centers
  • Sales order assets
  • Cost objects

3) Investment Center

With SAP’s profit center capabilities, companies can treat their profit centers like investment centers, making it easier to improve the flow of goods and services and transfer selected balance sheet items to specific profit centers as needed.

Here are a few key balance sheet items included in this area of SAP Profit Center Accounting:

  • Accounts Payable
  • Accounts Receivable
  • Fixed Assets
  • Work in Progress (WIP)
  • Material Stocks

Profit Center vs. Cost Center

In SAP, Profit Center Accounting is used to determine profit for internal areas of responsibility and evaluate returns on investment (ROI), economic value added (EVA), cash flow analysis, and operating profit across the entire organization. And on the other hand, Cost Center Accounting is used to determine total costs and compare actual costs to planned costs to ensure resources are allocated properly across the organization.

One key difference is that profit centers can be measured and directly impact a company’s bottom line, while cost centers do not have a direct impact on the bottom line.

Here are a few other differences between the two approaches to internal control in SAP:

Profit Center

A profit center is an organizational unit for internal controlling that helps organizations control manage costs and revenues in the same location, making it easier to evaluate a specific unit within the company and profit and loss trends for individuals or independent areas across the organization.

Profit centers reflect a management-oriented structure of the organization, making it easier to improve internal control, assign profit centers to account assignment objects, and evaluate the profit and loss of different organizational areas on a profit center level.

Cost Center

A cost center is an organizational unit within a larger controlling area that helps to capture the total costs across an organization and represents specific locations in which costs occur. It includes all the costs that are incurred by an organization and offers resources that help companies determine actual costs more accurately.

Organizational divisions within the cost center can be based on the following:

  • Activity-related
  • Settlement-related
  • Region-related
  • Section-related
  • Department-related
  • Responsibility-related

These organizational divisions within each cost center help companies monitor actual costs, plan cost figure standpoints in the Cost Center Hierarchy, and make comparisons to ensure actual costs are closely aligned with planned costs.

How Can We Help?

Whether you need help navigating SAP Profit Center configuration or implementation for the first time, additional support accessing revenue and expense reports of a specific business unit, or just an extra hand determining the person responsible for each profit center and its core operations, Surety Systems is here to help.

Our senior-level SAP consultant team has what it takes to handle all your SAP-related project needs, regardless of the complexity of your organizational unit structure or the scope of your project needs.

And, in the past three years, our team of SAP consultants  has been engaged on more than 100 consulting projects, making us the perfect fit for all your unique SAP project needs!

Getting Started with Our Team

Interested in learning more about profit centers in the SAP system or where our team of expert SAP consultants can help create profit center master data, manage profit center groups, and maximize your overall investment?

Contact us today to get started!

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Assign Profit centers to cost centers in SAP

Assign profit centers to cost centers.

The following training tutorials guides you how to assign profit centers to cost centers in SAP step by step.

Path: – SPRO > IMG > Controlling > Profit centers accounting > Assignment of account assignment objects to profit centers > Assign cost centers

Transaction code: – KS02

Enter transaction code SPRO in the SAP command field and enter.

Select SAP Reference IMG.

Follow the IMG path and double-click on “Assign cost centers”

Enter your controlling area and enter.

Insert cost center and press enter.

In the change cost center: basic screen, update profit enter key.

Click on the save button to save the entries. Thus successfully profit center is assigned to the cost center in SAP.

Getting an Overview of the Core Terms in Margin Analysis

After completing this lesson, you will be able to:

  • Get an Overview of the Core Terms in Margin Analysis

Overview of the Core Terms in Margin Analysis

https://learning.sap.com/learning-journeys/outline-cost-management-and-profitability-analysis-in-sap-s-4hana/outlining-profitability-analysis_b5b7efbb-55ea-4ff5-bc70-15d39d8a14eb

Introduction to Margin Analysis

The following video provides an overview of Margin Analysis.

Master Data

Master data in margin analysis include profitability characteristics and functional areas. Functional areas break down corporate expenditure into different functions, in line with the requirements of cost of sales accounting.

These functions can include:

  • Production.
  • Administration.
  • Sales and Distribution.
  • Research and Development.

For primary postings, the functional area is derived according to fixed rules and included in the journal entries. For secondary postings, the functional area and partner functional area are derived from the sender and receiver account assignments to reflect the flow of costs from sender to receiver.

Profitability Characteristics

Profitability characteristics represent the criteria used to analyze operating results and the sales and profit plan. Multiple profitability characteristics are combined to form profitability segments. The combination of characteristic values determines the profitability segment for which the gross margin structure can be displayed. A profitability segment corresponds to a market segment.

For example, the combination of the characteristic values North (Sales region), Electronics (Product group) and Wholesale (Customer group) determine a profitability segment for which the gross margin structure can be displayed.

The image represents a financial snapshot of a company's performance in the North region, focusing on the Electronics product group and the Wholesale customer group. The data includes key metrics such as revenues of 800, discounts of 100, cost of goods sold (COGS) of 550, and a gross margin of 150. Additional details include a specific product (Prod1), customer (Cust2), and sales representative (Miller).

True vs Attributed Account Assignments

Each activity relevant to Margin Analysis in the SAP system, such as billing, creates line items. G/L line items can carry true or attributed account assignments to profitability segments.

  • Goods issue item or billing document item in a sell-from-stock scenario.
  • Manual FI posting to profitability segment.
  • Primary Costs or Revenue.
  • Secondary Costs.
  • Balance Sheet Accounts with a statistical cost element assigned.

The derivation of attributed profitability segments is based on the true account assignment object of the G/L line item. This object can be of the following types:

  • Cost Center.
  • Sales Order.
  • Production Order (only for Engineer-to-Order process.)
  • Maintenance Order.
  • Service Document (service order or service contract.)

After the profitability characteristics are derived, the resulting data is mapped to the G/L line item according to specific mapping rules. An attributed profitability segment is derived to fulfill the requirement of filling as many characteristics in the item as possible to enable the maximum drilldown analysis capability.

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IMAGES

  1. Assignment of Cost Centers to Profit Center

    cost center assignment to profit center in sap

  2. SAP FICO Assigning Cost Centers to Profit Center

    cost center assignment to profit center in sap

  3. What Is a Profit Center in SAP S/4HANA?

    cost center assignment to profit center in sap

  4. A Simple Explanation About Profit Center & Cost Center In Accounting

    cost center assignment to profit center in sap

  5. How to Create Profit Center Standard Hierarchy SAP

    cost center assignment to profit center in sap

  6. How to assign materials to Profit Center in SAP

    cost center assignment to profit center in sap

VIDEO

  1. SAP FICO Profit Center Accounting Class 11

  2. Exercise 5-5

  3. SAP FICO Profit Center Accounting Class 12

  4. Exercise 5-4 Creating a Basic Cost Center

  5. S4 HANA

  6. SAP CO Master Data: Cost Center KS01 KS02 KS03 KS04 МВЗ создание изменение просмотр удаление

COMMENTS

  1. Assignment of Cost Centers

    The assignment of a cost center also implicitly assigns all the assets that belong to that cost center to the profit center (see Assignment of Assets). Caution If an asset is assigned to a profit center via an internal order, and this profit center is not the same as the one to which the cost center is assigned, the profit center to which the ...

  2. How to assign Cost Centers to Profit Center in SAP

    Step 2) In the next screen, Select 'SAP Reference IMG'. Step 3) In the next screen , 'Display IMG' Follow the menu path Controlling->Profit Center Accounting -> Assignments of Account Assignment Objects to Profit Center ->Assign Cost Centers. Step 4) In the next screen, Enter the cost center to be assigned to a profit center. Step 5) In ...

  3. Profit Center Accounting Basics in SAP S/4HANA Finance

    On this screen, select the ProfitCtr Acctg (profit center accounting) checkbox (1) for the controlling area given in the CO Area column (2). The year shown in the Fiscal Year column (3) represents the start of validity for the controlling area. Click the Save button (4) to activate profit center accounting. As soon as you activate profit center ...

  4. SAP CO Assigning Cost Centers to Profit Center

    Assigning a cost center to profit center, it assigns all the cost center assets to the profit center. Step-1:- Go to SPRO. Step-2:- Click on SAP Reference IMG button to proceed. Step-3:- Navigate to SAP Customizing Implementation Guide → Controlling → Profit Center Accounting → Assignments of Account Assignment objects to Profit Center ...

  5. Assignment of Cost Centers to Profit Center

    Step 1 − To assign Cost Center to profit center, navigate to SPRO → SAP Reference IMG → Controlling → Profit Center Accounting → Assignments of Account Assignment objects to Profit Center → Assign Cost Centers → Execute. Step 2 − Enter the Cost center to be assigned to Profit center. Step 3 − In the next screen, enter the ...

  6. Assignment of Cost Centers

    You need to assign cost centers to profit centers so that you can reflect all the primary costs from Financial Accounting and all secondary allocations to profit centers in Cost Center Accounting. The assignment of a cost center also implicitly assigns all the assets that belong to that cost center to the profit center (see Assignment of Assets ...

  7. SAP Profit Center 101: Improving Profitability Across Systems

    The SAP Profit Center is a pivotal component within the SAP Controlling module that empowers organizations to manage and analyze their financial performance strategically and improve profitability across the entire organization.. And, in an era where businesses navigate intricate financial landscapes, SAP Profit Center functionality emerges as an indispensable tool, offering unparalleled ...

  8. Assign Profit centers to cost centers in SAP

    Select SAP Reference IMG. Follow the IMG path and double-click on "Assign cost centers". Enter your controlling area and enter. Insert cost center and press enter. In the change cost center: basic screen, update profit enter key. Click on the save button to save the entries. Thus successfully profit center is assigned to the cost center in SAP.

  9. Assignment of Profit center in cost center

    Hello Friends, What is the significance of assignment of profit center in cost center ? System does not allow me to post activity prices in KP26 without assignment of profit center to cost center. ... The SAP Partner Groups will be INACCESSIBLE January 16-23 for a technical migration. For more information, please click the button at right to ...

  10. Getting an Overview of the Core Terms in Margin Analysis

    Primary Costs or Revenue. Secondary Costs. Balance Sheet Accounts with a statistical cost element assigned. The derivation of attributed profitability segments is based on the true account assignment object of the G/L line item. This object can be of the following types: Cost Center. Project. Sales Order.

  11. Assignment to Profit center

    Hi I would like to know if there is any T-code to take the list of Cost centers that are assigned to a particular profit center. ... Skip to Content. Mark Your Calendars. Mark Your Calendars with these Important Dates. SAP Community is moving in January 2024! ... Nov 06, 2009 at 11:13 AM Assignment to Profit center. 775 Views. Follow RSS Feed ...