Unit 5 Lesson 3 Management Accounting

mySAP Financials application component controlling

The mySAP Financials application component controlling (CO) contains all accounting functions necessary for effective controlling. If an organization divides accounting into internal and external viewpoints, CO represents the internal accounting prespective because it provides information for managers – those who are inside an organization and are charged with directing and controlling its operations.

 Financial statements required for external reporting purpose (balance sheet and P&L statement) are created in FI.

mySAP financial key functional area : management accounting is comprised of application component in the controlling (CO) and Enterprise Controlling (EC) areas. Controlling provides you with information for management decision making.

Components of Management Accounting

The components of CO & EC include the following key capabilities : Key Controlling capabilities:

·         Cost center accounting

It is useful for a source related assignment od overhead costs to the location where they occurred.

·         Internal orders

You use internal orders to collect and control cost according to the job that incurred the costs.

·         Activity Based Costing

Activity Based costing analyzes cross departemental business processes.

·         Product cost controlling

Product cost controlling calculates the cocts tahat occur during manufacture of a product or provision of a service.

·         Profitability analysis

Profitability Analysis analyzes the profit or loss of an organization by individual market segment.

Key enterprise Controlling capabilities :

·         Profit center accounting

Profit center accounting evaluates the profit or loss individual, independent areas within organization.

·         Consolidation

Enterprise Controlling Consolidation (EC-CS) provides the ability to consolidate financial data for both external (legal) and external (profit center) accounting perspectives.

Master data

The mySAP Financials Controlling application carries out cost and revenue element accounting in a single controlling area only, the primary organizational element of controlling. The controlling area forms a framework within which CO processes cost and revenue element transactions and all CO documents.

The controlling area represents a closed system used for cost accounting purposes within an organization.

Overhead Cost Controlling

Overhead in planning, monitoring, control and coordination in such areas as research and development , procurement , work scheduling and maintenance is gaining more importance. The mySAP Financials Overhead Controlling (CO-OM) component helps you plan, allocate, control, and monitor in your organization.

Cost center accounting

The cost center accounting component determines where costs appear in the organization. You thereby assign costs to their organizational subareas. Cost centers are organizational subareas that you can treat as independent account assignment objects in cost accounting.

Internal oder

Internal orders are normally used to plan, collect, and sttle the costs of internal jobs and tasks. Internal orders are categorized as either:

·         Standard orders used only for monitoring objects in Cost Accounting

·         Productive orders that are value added, that is orders that can be capitalized.

Activity based costing

activity based costing (ABC) is relatively new cost accounting method used by some companies to monitor costs by business process rather than cost centers.

Product cost controlling 

Product cost controlling is part of mySAP Financial’s Controlling application component and is a tool for managing costs related to the manufacturing process and the rendering of services.

Product cost controlling includes the following tools :

·         Product cost planning

·         Cost object controlling

·         Actual costing

·         Information system

 Product cost controlling can help you :

·         Plan your product cost accurately

·         Compare alternative cost estimates to optimize your business decision

·         Calculate actual costs by period

·         Answer one of questions about the cost of goods manufactured

Profit center accounting

Enterprise controlling’s profit center Accounting (EC-PCA) provides you with an internal view of your profitability. EP-PCA making it possible to evaluets the operating profit of different areas or units within your enterprise.