7/18/2019 Cost Element

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 Total Cost elements are divided in to two types... one is Primary cost elements and second is

Secondary cost elements.

Before this u have to know about controlling area.....

 

<b>aintaining the Controlling !rea<"b>

 #$%&' ( aintain Controlling !rea)

 The cost accounting environment where costs and revenues are managed.

 The link between *+ and C$ is established through the assignment of company codes to a

controlling area.

! controlling area can have multiple company code assignments. ,owever- a company code

can be assigned to only one controlling area.

 

 Then u have to know about Cost elements

 

<b>Create Primary and Secondary Cost /lements<"b>

 

! Primary Cost element is used to transfer cost from *+ to C$. +t is the cost carrier from *+ to

C$. +t has to have a corresponding 0l a"c in *+. /very cost related t1n will be carried over to

C$ by Primary Cost element $234.

 

! Primary cost elements can be directly posted and it is linked to a 0"3 account and must 5rst

be created in the *+ Chart of !ccounts.

 

! Secondary Cost element is used only in t1n which are within C$ only. There is no T1n e6ect

in *+. +t can be allocation- 7istribution 8eposting etc. within C$ $234. These data does not 9ow

to *+.

 

! Secondary cost elements cannot be directly posted. !n e1ample will be the Cost Center.

Secondary cost elements can only be created in Controlling.

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Cost element accounting records and groups the costs incurred. Cost elements are assigned

to a commitment item in *unds anagement. any cost elements can be assigned to one C+.

 To simplify valuations- planning and cost allocations you can combine cost elements into

groups #for e1ample- separate groups for salaries and bonuses). By combining cost element

groups according to their intended purposes- you can create cost element hierarchies. This is

valuable.

 

Cost elements describe the origin of costs. Cost element classi5es the organi:ations valuated

consumption of production factors within a controlling area. ! cost element corresponds to a

cost relevant item in the chart of accounts. Cost elements are de5ned as either primary or

secondary

7/18/2019 Cost Element

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/very Pro5t and 3oss 03 account that needs to be controlled has to be de5ned as a cost

element in S!P. ;ust as in *+ 0eneral 3edger !ccounts e1ist- in Controlling we have Cost

element. /ach *+ 0eneral 3edger !ccount which is a Pro5t and 3oss !ccount is also created as

a Cost element in S!P

 

Primary Cost /lements are those which are created from *+ general 3edger !ccounts andimpact the 5nancial accounts e.g. travelling e1penses- consumption account in fact any Pro5t

and 3oss 03 account. Primary #7irect /1penses) cost elements arise through the consumption

of productions factors that are sourced e1ternally.

 

Secondary Cost /lements are those which are created only in controlling and does not a6ect

the 5nancials of the company. +t is used for internal reporting only. The postings to these

accounts do not a6ect the Pro5t or 3oss of the company.

 

Secondary #settlement " apportionment from dept. to dept.) cost elements arise through the

consumption of production factors that are provided internally i.e.- by the enterprise itself.

Secondary cost elements are posted indirectly.

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!&' ( Create Primary or Secondary Cost elements

+f you maintain multiple controlling areas- remember to set the C$ !rea via /1tras (> Set

Controlling !rea