Must Know SAP CO Terms for Every SAP FI/CO Consultant & Learners

1. Basic Cost Terms

Term	Description
Cost Element	The “account” in CO that captures costs. It links FI (G/L accounts) to CO.
Primary Cost Element	Costs coming directly from FI (like salaries, rent, utilities) and links an expense G/L account to a cost object in CO.
Secondary Cost Element	Costs used for internal allocation within CO (e.g., activity allocation, assessment, settlement), without any link to FI G/L accounts.
Cost Center	Organizational unit where costs are collected (e.g., Production Dept, HR Dept).
Cost Object	Any collector of costs such as production orders, sales orders, WBS element, Cost Center etc.
Cost Object Controlling	The sub-module for tracking costs on cost objects like production orders, process orders.
Direct Cost	Costs directly assigned to a product or order (e.g., material, direct labor).
Indirect Cost / Overhead	Costs not directly assignable and allocated using rules (e.g., electricity, admin salaries).
Variable Cost	Costs that change with production volume.
Fixed Cost	Costs that remain constant regardless of output.

2. Cost Planning & Budgeting

Term	Description
Planned Cost	Estimated/forecasted cost set in advance for comparison.
Actual Cost	Cost posted from actual transactions (FI postings, goods issues, activity confirmations).
Target Cost	Standard or Expected cost based on actual quantity × planned rate.
Budget	Approved spending limit, typically in Internal Orders, Projects (PS), Cost Centers.
Variance	Difference between planned/target cost and actual cost.
Standard Cost	Predetermined cost for a product, used in product costing and inventory valuation.

SAP S4 HANA Controlling (CO) Videos

₹15,000.00

Buy Now

3. Allocation & Distribution Terms

Term	Description
Activity Type	Represents services provided by a cost center (e.g., Machine hours, Labor hours).
Activity Price	Cost per unit of activity type (e.g., ₹500 per machine hour).
Internal Activity Allocation	Posting cost from a sender cost center to a receiver (e.g., maintenance hours charged to production order).
Assessment	Allocates costs from one cost center to other cost centers or orders using a secondary cost element.
Distribution	Similar to assessment but retains the original cost element on the receiver side.
Overhead Rate / Surcharge	A percentage or fixed amount added to direct costs to account for overhead.
Settlement	Period-end transfer of collected costs (e.g., from an Internal Order to a Cost Center, WBS, or Asset).
Statistical Posting	Information-only postings (not real costs) e.g., to Profit Center.

4. Cost Object Controlling (Product Costing)

Term	Description
BOM (Bill of Material)	List of materials used for a product; contributes to material cost.
Routing / Recipe	Steps and resources required for production; contributes to labor & machine costs.
Work Center	Place where production activities occur; linked to activity types.
Cost Estimate	Calculation of expected cost for producing a product.
Cost Component Structure	Breakdown of costs (material, labor, overhead, etc.) for analysis.
WIP (Work in Process)	Valuation of partially completed products.
Scrap Cost	Loss due to defective or unused material.
Production Variance	Difference between planned/standard cost and actual production cost.

SAP S/4 HANA 𝐅𝐈𝐂𝐎: Online Training with 𝐈𝐧𝐭𝐞𝐫𝐧𝐬𝐡𝐢𝐩

₹75,000.00₹57,999.00

Buy Now

5. Period-End Closing Terms

Term	Description
Accrual / Deferral	Period-end adjustments (e.g., anticipated costs posted before invoice receipt).
Reposting	Manual adjustment of posted costs between cost objects.
Distribution Cycle / Assessment Cycle	Periodic allocation rules used at month-end.
Result Analysis	Valuation of costs and revenues for long-term projects.
Variance Calculation	Compares planned vs. actual cost to analyze deviations.

6. Profitability & Reporting Terms

Term	Description
Cost of Goods Sold (COGS)	Cost assigned to products sold.
Cost Component Split	Detailed reporting of costs (e.g., raw material, labor, overhead).
Profit Center	Organizational unit to evaluate profitability of a division or location.
Operating Concern	Highest level in CO-PA for profitability reporting.
Value Fields / Characteristics	Dimensions used in CO-PA (e.g., customer, region, product).