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The main aim of Profit center accounting is to determine profit for internal areas of responsibility.

Further by assigning balance sheet items (Fixed assets, Receivables and Payables, Stocks) to profit centers, we can
also analyze our companyu2019s fixed asset by profit center. Profit centers can be set
up according to product lines, geographical factors (region, offices or production sites) or
function (production, sales). We can divide our business into profit centers by assigning the profit centers to
the various master data (materials, cost centers, orders, projects, Sales orders, assets, cost objects
and profitability segments). Every profit center is assigned to the organizational unit controlling area.

Cost Center provides information on the costs incurred by your business. Within SAP, you have
the ability to assign Cost Centers to departments and /or Managers responsible for certain areas of the business as
well as functional areas within your organization. Cost Centers can be created for such functional areas as Marketing,
Purchasing, Human Resources, Finance, Facilities, Information Systems, Administrative Support, Legal,
Shipping/Receiving, or even Quality.

Regards

Profit Center: A unit of an organization that generates both revenue and expenses. Its goal is to have revenue
exceed expenses.

Cost Center: A unit of an organization that generates expenses and has no responsibility for generating revenue.
Its goal is to adhere to expense budgets.

Profit Center Accounting provides visibility of an organizationu2019s profit and losses by profit center. The
methods which can be utilized for EC-PCA (Profit Center Accounting) are period accounting or by the cost-of-sales
approach.

Profit Centers can be set-up to identify product lines, divisions, geographical regions, offices, production sites or
by functions. Profit Centers are used for Internal Control purposes enabling management the ability to review areas
of responsibility within their organization.

The difference between a Cost Center and a Profit Center is that the Cost Center represents individual costs
incurred during a given period and Profit Centers contain the balances of costs and revenues.

Regards,

Ashok

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