Describing enterprise controlling using profit center accounting


After completing this lesson, you will be able to:

  • Describe the role of profit center accounting

Profit center accounting

Profit center accounting in SAP S/4HANA helps you calculate the profit and performance not only of the entire company, but also of individual organizational units. In this way, any organizational unit can be seen as a company within the company. A profit center is a business entity responsible for profit and loss with its own balance sheet and profit and loss statement.

Accounting tools for analyzing profit and success

The following accounting tools are available for analyzing profit and success:

  • Profitability Analysis (CO-PA): Use this tool to provide the decision-making groups in your organization (such as the board of management, sales and distribution, marketing, and planning) with market-oriented information. Define market segments by characteristic (such as product, product group, customer, customer group, or geographical area) and internal organizational unit (such as company code or business area) to analyze the profitability of segments in your external market.
  • Profit Center Accounting (PCA): Use this tool to evaluate specific areas or units in your organization. Structure profit centers by region (such as branches or plants), function (such as production or sales), or product (such as product groups or divisions), to analyze internal profit and loss for profit centers. The online document splitting function in financial accounting provides balance sheet reporting on profit center level. To meet legal operational segment accounting requirements (as described in IFRS and US GAAP), assign the segment accounting object to profit centers in SAP S/4HANA.

Profit center accounting (PCA) allows you to calculate the internal operating results for profit centers of the company. A profit center represents an organizational sub-unit that operates independently in the market and is responsible for its own costs and revenues.

You structure your company into profit centers by assigning the master data of each profit-relevant object to a profit center. Profit-relevant objects include materials, cost centers, orders, projects, sales orders, assets, cost objects, and profitability segments.

All cost-relevant and profit-relevant business transactions in SAP S/4HANA are updated in the hierarchy structure of the company. These transactions are simultaneously processed in the original component and organized according to cost and revenue elements. This method of maintaining cost and revenue information transforms all the flow of goods and services within the company into exchanges of goods and services between profit centers. This profit center structure applies to the actual posting and the profit center plan data.

You can also regard a profit center as an investment center. In addition to the flow of goods and services, you can transfer balance-sheet line items to profit centers. Balance-sheet line items include fixed assets, payables and receivables, material stocks, and work-in-process items. This allows you to calculate key figures, such as profit on sales, return on investment, and cash flow.

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