I want to understand the main concept of profit center accounting, for this purpose I have read SAP Library material plus many SCN posts and many other relevant materials but still I am not clear and have some questions relating to this.
Why we use profit center accounting i.e. what is the main core purpose of using profit center accounting? If I have COPA running in my scenario then what’s the benefit I will get through profit center accounting? (I believe that through COPA we can check all type of profitability)
I also heard that profit center accounting can help in reconciliation of CO and FI because in profit center accounting data is maintained on the basis of accounts. If this is the case then what advantage I will get through CO FI Real Time integration.? Does PCA and COFI real time integration have same purpose?
What is the best practice regarding the number of profit center in a company. I have seen that profit center is created for all finish products(SKU) and as a result of this number of profit center rises.
depends on the Business requirements, we can define profit centers.
Example. If you have 3 Plant and u need to generate Independent Financial reports for this 3 plants, we can create this three plant as a profit center.
previously we used Business Area. but now ECC 6 , it is Profit centers.
also, document Splitting principle also based on PCA.
All transactions, system identify the profit center.
this is just a simple Explanation
Let me give you some information about Profit center:
A profit center is a management-oriented organizational unit used for internal controlling purposes. Dividing your company up into profit centers allows you to analyze areas of responsibility and to delegate responsibility to decentralized units, thus treating them as "companies within the company". EC-PCA lets you set up your profit centers according to product (product lines, divisions), geographical areas (regions, offices or production sites) or function (production, sales).
1. The difference between PCA and PA:
- Profit Center Accounting (EC-PCA) provides a focus on internal areas of a company that have responsibility for achieving certain profit or productivity goals.
- Profitability Analysis (CO-PA) provides a focus on the results of a company’s doing business with the external marketplace. It provides the ability to define which aspects or segments of that market are relevant for analyzing operating results, such as profit by customer, product, geographic area, sales organization, etc.
- EC-PCA lets you analyze internal profit and loss for profit centers. This makes it possible for you to evaluate different areas or units within your company. You can structure profit centers according to region (branch offices, plants), function (production, sales), or product (product groups, divisions). Profit Center Accounting is a component of the "Enterprise Controlling" module.
- PA Reporting: lets you analyze the profitability of segments of your external market. These segments can be defined according to products, customers, countries, and numerous other characteristics, as well as your internal organizational units such as company codes (i.e. 1200) or distribution channels (I.e. direct, wholesale, e-Commerce).The aim is to provide your executive management, sales, marketing, planning, and other groups in your organization with decision-support from a market-oriented viewpoint.
Profit Center Accounting (EC-PCA) is a statistical accounting component. This means that it takes transaction data posted in other components and represents it from a profit-center-oriented point of view. The postings in EC-PCA are statistical postings, since the profit center is not itself an account assignment object in Controlling.
The integration of the R/3 system makes it possible to post profit-relevant data to Profit Center Accounting automatically as soon as the transaction is originally posted. The system either transfers the relevant items from the original postings or creates additional postings.
All data relevant to costs flows automatically from Financial Accounting to Controlling. As part of this process, the system assigns the costs and revenues to different CO account assignment objects like cost centers, projects, orders or product cost collectors. The relevant accounts in Financial Accounting are managed in Controlling as cost elements or revenue elements as appropriate
3. Sample profit center master data:
Hope it helpful