Cost of sales accounting:

The companys profit and loss statement is created using cost of sales accounting.
The profit and loss statement can be created using two types of accounting
Period accounting
Cost of sales accounting
The operating result is the same regardless of the type of the accounting used. The
procedure you should use is either
Legally prescribed
Or can be chosen by the company, where legal alternatives are offered, in this case
the company considers business criteria such as international comparability, when
deciding the type of accounting to use
In period accounting the total result for a period and the total costs of this period
are summarized:
1) The total result for a period is the sales revenue minus a reduction in the
inventory level or plus an increase in the inventory level
2) The total costs of the period are grouped by expense type, in other words
you can just summarize the balance of similar expense accounts such as
different account for personal expense. This grouping shows how the costs
are distributed to the various production factors
In cost of sales accounting the sales revenue for the period and the sales costs of
the period are summarized
1) The sales revenue for the period is determined in the same way as in the
period accounting, balance sheet changes are not considered
2) The sales cost of the period represent the expenses related to the sales, the
expenses are not grouped by expense type as in the period accounting,
instead they are grouped by function such as production, sales,
administration, research and development

The cost of goods sold manufactured is determined when the goods are issued, in
period accounting the posting is GR/IR clearing account is debited and balance
sheet change account is credited, while in the cost of sales accounting the posting
is GR/IR account is debited and cost of goods manufactured account is credited
To assign the remaining costs to their origin in cost of sales accounting the sap
system requires an additional characteristic, the functional area. Typical functional
areas are sales, production, marketing, administration, research and development
The standard program for creating financial statements RFBILA00 contains the
profit and loss statement using period accounting. This view is easy to achieve in
the sap erp system, as it represents a simple display of a gl account or group of
accounts for a report row.
Cost of sales accounting required the use of organizational units called functional
areas to divide costs posted to the same expense account to separate report items,
as stated above for functional areas, you can present the same type of expense in
different sections of your profitability analysis, by grouping expenses by function
cost of sales accounting also defines the business transaction that each individual
expense in the company results from.
Functional area can be assigned directly to master records, such as cost centers,
internal orders, or into gl accounts
For objects where no functional area can be entered in the master data you derive
the functional area via a substitution rule
In cost of sales accounting, the coding block that is the list of account assignment
objects, is extended to include a field for the functional area. This field is filled by
Manual entries
Automatically entering the functional area using substitution rules
Automatically copying a functional area entered from the master record of p/l
account
Automatically copying a functional area entered from the master record of the co
object

The sequence above also indicates the priority of the derivation options. Manual
entries have the highest priority. The system should be set, however so that a
manual entry is not normally required and the functional area is derived from the
assigned CO object, the p/l account or using substitution rules

Cost of sales accounting in classic general ledger accounting:

To create the balance sheet in cost of sales accounting in classic general ledger, the
sap system required transaction figures for each functional area. In the classic
general ledger however the transaction figures are maintained only for the
organizational units that is company code and business area. In this case a cost of
sales ledger must be used, in which transaction figures are also maintained for each
functional area
A special balance sheet report can be used to access these transaction figures, and a
profit and loss statement can be created in cost of sales accounting
If additional transaction figures are to be maintained using existing or new account
assignment fields, the special ledger component must be used
Cost of sales accounting in new general ledger:
The totals of the table of the new general ledger (FLAGFLEXT) updates the
functional areas when the scenario cost of sales accounting is assigned to a
ledger. There is no need to activate a special ledger in the special ledger
component.