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Cost Center Accounting in SAP S/4 HANA

What is Cost Center Accounting (CCA)?

Cost Center Accounting in SAP is a component of SAP CO module, which is used to manage and control expenses associated with specific Cost Centers or departments, to make informed decisions, allocate costs, analyze costs and report in an organization.

How to Activate Cost Center Accounting for a CO Area?

In order to define standard hierarchy and create cost centers we first need to Activate cost component for a Controlling Area.

Path: SPRO > IMG > Controlling > General Controlling> Organization>Maintain Controlling Area or using T-Code (OKKP)

STEP 1: In Maintain Controlling Area select Activate components/control indicators.

STEP 2: Enter 'Fiscal year' period and select cost center component as 'Component Active.'

Cost Center in SAP

1. Fiscal Year: A time period (usually 12 months) for which a company is required to provide its physical inventory count and balance sheet.

2. Cost Center Component Active:

If Component is active: The Cost Centers are validated and can be used as account assignment objects.

If Component is not active: The Cost Centers are not validated and cannot be used as account assignment objects.

Let's consider an example of a Cost Component Structure BAJAJ & configure the core components of cost center management in the system:

Cost Center in SAP

Path to configure Cost Center Accounting: In SAP Easy Access screen...

Cost Center in SAP

Cost Center Standard Hierarchy

Cost Center Standard Hierarchy: is a structured framework used to organize and represent Cost Center Group and Cost Centers within an organizations Controlling Area.

Using (T-Code OKEON), we can create both cost center group and cost center under CO Area which is the organized CO structure.

STEP 1: Enter the Controlling Area.

Right-Click on Cost center group, you will get to see the below options.

Select Create Cost center to Create cost centers within the same Group.

Select Create Group (Same level) to create another Group at the same level.

Cost Center in SAP

STEP 2: Enter Basic details of Cost center, cost center name, validity period, person responsible, Cost center category- related to production, marketing, sales etc., Business area, currency, profit center.

Cost Center in SAP

Note: If Activation Status is Red* which means it is still in Inactive state and the cost center cannot be used.

Cost Center in SAP

STEP 3: Once you Click on 'Save' the Activation status turns Green* which mean now cost center is Active and is allowed for postings.

Cost Center in SAP

The Cost Center Standard Hierarchy of BAJAJ is created.

Cost Center in SAP

Cost Center Group

A Cost Center Group is a logical grouping or categorization of Cost Centers based on specific criteria or characteristics. Cost Center Group names can range from 4 to 10 characters in length.

Cost center group can be created in standard hierarchy using T-Code OKEON and also by

Path: SAP Easy Access>Accounting>Controlling>Cost Center Accounting>Master Data>Cost Center Group> Create (T-Code KSH1)

STEP 1: Enter Controlling Area and Cost Center Group

Cost Center in SAP

STEP 2: Similar to creation of Cost center Standard Hierarchy using T-Code OKEON, we can create CCtr Std. hierarchy here also.

SAP Cost Cnter

Cost Center

⦁ Cost Center is an organizational unit used for managing and tracking costs within a company. Cost Centers represent specific areas, departments, or functions within the organization where various types of expenses are incurred.

⦁ In SAP there are two different types of Cost Center such as primary cost center (incurring Direct costs) and secondary cost centers (incurring Indirect costs).

⦁ Cost Center names length can be from 4 to 10 characters long.

⦁ Cost center can be defined in the Standard Hierarchy and also by using T-Code KS01.

To Define Cost Center:

Path: In SAP Easy Access>Accounting>Controlling>Cost Center Accounting>Master Data>Cost Center>Individual Processing> Create Cost Center (T-Code KS01)

STEP 1: Enter the Controlling Area, Cost Center and Validity period.

Cost Center in SAP

STEP 2: Enter the fields associated with Cost Center.

'Name'- The cost center name used for online displays.

'Person Responsible'- Person responsible for given cost center.

'Cost Center Category'- like production, service, administration

'Hierarchy Area'- is the group below which cost centers are to be created.

'Currency'- the currency key in which cost centers are to be calculated.

'Profit Center'- associated profit center of the cost center

Cost Center in SAP

Thank you for taking the time to read my blog. I appreciate your support and hope you found this content valuable. Stay tuned and follow me for more insightful articles in the future.

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