You need to create a gl account as a cost element inorder to assign a costcenter/internal order etc to it. all profit center accoutns are usually created as cost elemetns because you need to capture internal costs.
eg if you have gl 10000 electricity and it has a credit balance of 50000 and this is comprised of 5 regions you can create each of those regions as a cost elemetn. this way you know which region is consuming more than expected. This helps in reporting purposes
Points will be appreciate
Cost element describes the Orgin of the costs.
Cost element are defined as either primary or seconday .
<b>Primanry cost element</b> arise through consumption of production factors that are sourced externally
eg; Material cost and salary cost.
<b>Secondary cost element</b> arise through the consumption of produiction factors that are provided internally(that is by the enterpise itself).
>controlling>cost center >maste data>cost element >Individual processing>Create cost element.
assign the points if usefull...
Message was edited by:
> hi Subhir,
> Cost element describes the Orgin of the costs.
> Cost element are defined as either primary or
> seconday .
> Primanry cost element arise through consumption of
> production factors that are sourced externally
> eg; Material cost and salary cost.
> Secondary cost element arise through the consumption
> of produiction factors that are provided
> internally(that is by the enterpise itself).
> Tcode Ka01.
> assign the points if usefull...
Cost elements are categorised as Primary and secndary.
Primary cost elements are basically GL accounts and they have 1: 1 relationship.
Secondary cost elements exists only in CO which is management reporting so that u can move cost from cost object to another objcts.
Generally u define only P& L items as Primary cost elements.
U can post it to a cost elements only in association with a cost object which are like Cost center, internal order, WBS elements etc.
U cannot post to a cost element independent of a cost object.
Generally the value flows from GL to CO modules.
Primary and secondary cost elements are categorised into different cost element category depending upon the usage
to know more about Cost elements pl read the following help link
The cost element is a classification code and is a mandatory field on the trsansactions that involve costs arising in a company code. It is used to label and differentiate the following costs types:
- Direct cost elements for goods and services procured externally
-indirect(internal) activity cost elements
There may be several cost element types based on a classification of cost elements by use or origin:
- Material Cost Elements
- Settlement costt elements for orders
-Cost elements for internal cost allocations
a cost element is also used to maintain a collection of information in particular, the transaction documents that bear the code of the cost element and have been selected for example for a particular accounting period.
Direct cost elements are maintained in the FI-GL master records. Indirect cost elements have no counterpart in the financial accounts and are maintained exclsively in cost accounting. The cost element concept ensures that each business transaction is posted under a particular cost element in CO is properly assigned to the relevant cost centers, orders, projects, cost objects and so on. Each material issued in MM, each invoice recorded in SD, each external invoice in SD-IV, flow via the FI-GL to the relevant cost object. The expense accounts of the FI-GL are automatically adopted by CO as the proimary cost elements. Additional primary cost elements have to be added to FI to accomodate accruals and other imputed costs. Secondary cost elements are created and managed in CO only. They represent value flows such as Internal cost allocation, surcharge allocation, settlement transactions etc.
Assign points if the information is useful to you
If you want to know the cost of a product, you need to collect the relevant cost of the product. Basically, acutual costs are recorded in financial accounting. But all costs are not relevant to determine the product cost. So we have to take only some costs while calculating the product cost. That is the reason only some costs are defined as cost elements, means effects the controlling area.
Basically costing (controlling) means identifying, collecting and allocating the costs to products, terriotories (in sap cost centers, profit centers and internal orders etc).
Thus, this concept is useful for identifying the relevant cost in controlling area and helps in allocating the cost to relevant cost centers and profit centers.
As told by Ranjit, there are two cost elements, primary and secondary. you can directly allocate the primary cost elements to cost objects. secondary cost elements are distributed to cost objects on some relevant basis.