In SAP S/4HANA, any financial transaction that concerns operating expenses or revenues is entered through a journal entry that posts to primary cost or revenue accounts. For each cost or revenue line item, you must define the relevant controlling account assignment:
The G/L account defines what is the expense or revenue and
The account assignment defines what is the purpose of the expense or revenue.
Expense and revenue postings can come from a range of sources such as financial records, supplier and customer invoices, and so on.
For example: To specify which department or project you ordered marketing brochures from your supplier for, you enter the supplier invoice and attribute the expense to the cost center or the project for which the order was made.
Which objects?
Here is a list of objects that can be used as a cost object, either controlling native (internal) or other source (external):
- Cost center
- Work breakdown structure (WBS) element
- Profitability segment
- Sales order
- Production order
- Internal order (SAP S/4HANA Cloud, private edition only)
- Process (SAP S/4HANA Cloud, private edition only)
- …
Note
As you already know, overhead cost controlling is responsible for the collection and processing of costs that can’t be assigned directly to a product or a service. Let’s have a closer look at how overhead costs are processed:
- Primary costs which originate from outside of controlling are assigned to various controlling account assignment objects.
- Costs are allocated monthly to the drivers that caused the expense. Different types of allocations can be used (such as assessment, activity allocation, and cost reassignment).
- If you are a manufacturer, you use product cost controlling to allocate overhead costs to the production costs.
- If there are variances leading to balances on the overhead objects, these are settled to profitability analysis.
As mentioned, all overhead costs are allocated monthly to different objects such as cost centers, WBS elements, and business processes. This step is important to understand what drives the costs incurred and to charge them accordingly.
