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Understanding Transactions in the Controlling Module

Learning Objective

After completing this topic, you should be able to

determine the transaction and data required to extract the desired Controlling information, in a
given scenario

1. Controlling transactions
The Controlling (CO) module of SAP R/3 enables you to define the cost structure of a
company. It helps management make decisions related to controlling the costs of a
business.
The CO module provides transactions that enable you to perform control-related tasks.
By performing controlling transactions, you can

compare the actual costs with the planned costs

calculate the product cost

evaluate how each business unit within the company is performing

analyze the profit of the company

The most commonly used transactions in the CO module include

Cost Center Accounting

Internal Orders

Product Costing

Profit Center Accounting

Profitability Analysis
Cost Center Accounting enables you to define the cost structure of the company, assign
costs to the appropriate cost centers, and plan the costs for each business unit and
compare the planned costs with the actual costs.
A cost center is a business unit marketing, production, or customer service within a
company, which incurs expenses, such as salaries, telephone, and electricity.
Internal Orders enables you to plan, track, and calculate the cost of performing a specific
task displaying the product in a trade fair or advertising the product, for example. The
cost incurred to perform these tasks is settled through internal orders.
Product Costing enables you to

calculate the cost incurred while manufacturing a product

decide the minimum price at which you can market your products

plan the product cost without referring to set prices, and

analyze the planned and actual costs of the product

Profit Center Accounting evaluates how each business unit within your organization is
performing and contributing to the profit of the company. The business unit may be
incurring expenses but also generating revenues.
For example, the salary paid to the personnel of Sales Department is considered costs,
whereas the profit earned by the Sales Department is considered revenues.
Profitability Analysis enables you to analyze the profit of an organization based on
product, price, customer, or sales organization.
A sales organization is a unit within a company that is responsible for the sales and
distribution of goods and services.
The CO module of SAP R/3 works in combination with the Financial Accounting (FI)
module of SAP R/3. The CO module receives data from the FI module.

Try It
You can access the CO module from the SAP Easy Access screen.
To complete the task

1.

Double-click Accounting Controlling

The SAP menu includes the following options: Office, Cross-Application Components, Logistics, Accounting,
Human Resources, Information Systems, and Tools.

A list of transactions Cost Center Accounting, Internal Orders, Product Costing,

Profit Center Accounting, and Profitability Analysis is displayed.

Question
Match each CO transaction with its corresponding business function.
Options:
A.

Cost Center Accounting

B.

Internal Orders

C.

Product Costing

D.

Profitability Analysis

Targets:
1.

Enables you to analyze the profit of an organization at different business levels

2.

Enables you to calculate the cost incurred while manufacturing a product

3.

Enables you to compare the actual costs with the planned costs

4.

Enables you to plan, track, and calculate the cost of performing a specific job

Answer
A business aims to earn profits. It is very important for an organization to analyze
the profit at different business levels, such as sales organization, product, and
consumer. You can analyze the profit of an organization using Profitability
Analysis.
A product goes through different manufacturing levels before it is delivered to the
customers. It is essential for an organization to calculate the cost of a product at
each manufacturing level to ensure that the cost of the product is not more than
what is planned.
Every organization wants to have visibility about the costs incurred in the
organization. Using Cost Center Accounting, you can compare the actual costs
with the planned costs, and have visibility about the costs.
To promote a product in the market, an organization needs to display the product
in trade fairs or advertise the product. The cost incurred for these promotional
activities is considered as expenses for the organization. To settle this cost, the
organization needs to use Internal Orders.

Correct answer(s):
Target 1 = Option D
Target 2 = Option C
Target 3 = Option A
Target 4 = Option B

2. Organizational structure data

To align your CO tasks with SAP R/3, you need to define the components of your
business units in the organizational structure components provided by SAP R/3.
When you perform any control-related tasks in SAP R/3, you need to refer to the
components defined in the organizational structure of the CO module.
The organizational structure components available in SAP R/3 that you can use to map to
your existing business units involved in controlling are
Client
In SAP R/3, a client is at the highest level in the organizational structure. A client is a
collection of administrative, organizational, and business units that work as a group
towards a common purpose. For example, in SAP R/3, you can define a corporate group
as a client.
Company code
A company code is an independent legal entity within a client and is at the second level in
the organizational structure. Each company code consists of its profit and loss account and
its own balance sheet. For example, in SAP R/3, you can define a company within a
corporate group as a company code.
Controlling area
You use controlling area to record the costs and revenues of the business when
performing the Cost Center Accounting transaction. The controlling area consists of cost
centers and profit centers. A cost center only monitors the costs of the business. For
example, a production unit of a business is a cost-incurring unit. A profit center monitors
both costs and revenues of the business. For example, a sales unit of a business is a
revenue-generating unit.
You can assign one or several company codes to a controlling area.
Operating concern
An operating concern is a sales structure defined by the company to calculate the
revenues of the company. The sales structure consists of the sales organization, product,

customer, and price. When you perform a profitability analysis, you must specify the
operating concern. Using the sales structure, you can decide at what level you want to
analyze the profitability of the company.
You can assign one or several controlling areas to an operating concern.
Suppose you want to analyze the profit of the company at the customer level. For this,
you need to perform Profitability Analysis.
When you perform Profitability Analysis, you need to refer to the sales structure
operating concern defined in the organizational structure component.
In addition, you need to specify the company code for which you want to analyze the
profit.
If on the other hand, you wanted to compare the actual costs with the planned costs, you
would need to perform Cost Center Accounting.
When you perform Cost Center Accounting, you need to refer to the organizational
structure component, controlling area.

Question
Suppose you work for Award Sportswear. The company specializes in casual and
formal sportswear. The company's headquarters are in Los Angeles, with local
offices in Maryland and Georgia. The company analyzes the profits on a quarterly
basis.
Award Sportswear wants to analyze the profit at the sales organization level. To do
this, you need to perform Profitability Analysis.
Which organizational structure components should you specify in Profitability
Analysis?
Options:
1.

Client

2.

Company code

3.

Controlling area

4.

Operating concern

Answer
Option 1: Incorrect. The client would be the corporate group. You do not have to
specify the corporate group while performing Profitability Analysis.

Option 2: Correct. To analyze the profit of the company at the sales organization
level, you need to specify the company code to which the sales organization
belongs.
Option 3: Incorrect. Controlling area is used to record the costs and revenues of
the business. It is not used to analyze the profitability of the company.
Option 4: Correct. Operating concern enables you to decide at what level you
want to analyze the profitability of a company. Award Sportswear wants to analyze
its profit at the Sales organization level.
Correct answer(s):
2. Company code
4. Operating concern

3. Master data
To perform CO transactions, in addition to organizational structure components, you need
to define the CO Master data components.
The essential master data components that you need to begin working with the CO
module are
cost element
Cost element describes the origin of costs within your company. For example, expenses
incurred on salaries, telephone, and electricity are considered as the starting point of costs
in your company. Each transaction related to these expenses will be recorded under the
cost element for that expense.
cost center, and
A cost center is a business unit such as a production unit that incurs costs within a
company. A cost center code is assigned to each business unit. The costs incurred by a
business unit are recorded under its cost center code.
profit center
A profit center is a business unit such as a sales unit that earns revenues within a
company. A profit center code is assigned to each business unit. The profit earned by a
business unit is recorded under its profit center code.
Suppose you want to record the cost incurred for electricity expenses. For this, you need
to perform Cost Center Accounting. When you perform this transaction, you need to refer
to the cost element of electricity expenses, which is a master data component of the CO
module. The cost incurred for electricity is recorded in the electricity cost element.

However, when you want to find the total costs of all elements salary, telephone,
electricity, stationery incurred by a business unit such as production, you would refer to
the cost center component, using the code for that cost center.

Question
Sonical Electronics has two Production Departments that look after the production
of washing machines and refrigerators. The company wants to have visibility of all
the costs that have been incurred by the Production Department that
manufactures refrigerators. To do this, you need to perform Profit Center
Accounting.
Which master data component would you have to specify to perform a Profit
Center Accounting transaction?
Options:
1.

Cost element

2.

Cost center

3.

Profit center

Answer
Option 1: Incorrect. You specify the profit center master data component to record
the profit gained in the profit element of that expense.
Option 2: Incorrect. When you perform the Profit Center Accounting transaction,
you do not have to specify the cost center code. This is because a cost center is
only concerned with the costs that are incurred in the company, and is not
concerned with the profit.
Option 3: Correct. You specify the profit center master data component to find out
the total profit gained by the production unit at Sonical Electronics.
Correct answer(s):
3. Profit center

4. Data flow in Controlling

Each transaction in SAP R/3 involves a data flow; it prompts you for input data, processes
the data, and produces output data.
The input data for the transactions comes from the organizational structure and master
data components, along with some transaction-specific data.

The output of the transaction is in the form of a report or updates to the SAP R/3
database.
Here is a business scenario that explains the important input and output of some CO
transactions.
Brocadero is a company that manufactures hi-fi and public-address equipment. It is
based primarily in the US but has recently begun manufacturing in the United Kingdom
and Australia. The company wants to

compare the actual cost of production with the planned cost

calculate the costs incurred while manufacturing a product

find out the contribution of each business unit to the profit of the company, and

analyze the profit at different business levels

Drill Down Home Page

The four main transactions involved in this scenario are

Page 1 of 4: Cost Center Accounting

At the start of the fiscal year, Brocadero has planned the expenses that will be incurred
on salaries.
At the end of the first quarter of the fiscal year, Brocadero wants to compare the actual
cost incurred on the salary expense with the planned cost in order to ensure that the cost
element is under control. For this, you need to perform the Cost Center Accounting
transaction.

Page 2 of 4: Cost Center Accounting

Here is the organizational structure input for the Cost Center Accounting transaction:

Graphic
Description of the data flow in the Cost Center Accounting transaction.
When you perform the Cost Center Accounting transaction, the data comes from
the organizational structure and master data components of the CO module. The
organizational structure input is company code (C001) and controlling area code
(0001).

Description ends.

company code: C001 to specify the company for which you want to perform the transaction, for
example Brocadero
controlling area code: 0001 to record the total costs incurred by Brocadero

Page 3 of 4: Cost Center Accounting

Here is the master data input for the Cost Center Accounting transaction:

Graphic
Description of the data flow in the Cost Center Accounting transaction:
The master data input is cost element code (210000) and cost center code
(996701).
The output is a report that compares the actual cost incurred on the salary
expense with the planned cost.
Description ends.

cost element code: 210000 to record the salary expense

cost center code: 996701 to specify for which business unit (production, marketing, or sales)
the salary expense was incurred

Page 4 of 4: Cost Center Accounting

The output is a report that compares the actual cost incurred on the salary expense with
the planned cost.

Page 1 of 3: Product Costing

Brocadero wants to calculate the costs incurred while manufacturing a product. For this,
you need to perform the Product Costing transaction.

Page 2 of 3: Product Costing

Here is the organizational structure input for the Product Costing transaction:

Graphic

Description of the data flow in the Product Costing transaction:

When you perform the Product Costing transaction, the data comes from the
organizational structure and master data components of the CO module. The
organizational structure component is company code (C001) and controlling area
code (0001).
Description ends.

company code: C001 to specify the company for which you want to perform the transaction, for
example Brocadero
controlling area code: 0001 to record the total costs incurred by Brocadero

Page 3 of 3: Product Costing

The master data input for the Product Costing transaction is cost center code: 996701
to record the costs (salary, electricity, stationery, and telephone) incurred to manufacture
the product.

Graphic
Description of the data flow in the Product Costing transaction:
The master data input is cost center code (996701).
The output is a report that lists the costs incurred while manufacturing hi-fi and
public-address equipment.
Description ends.
The output is a report that lists the costs incurred while manufacturing hi-fi and publicaddress equipment.

Page 1 of 3: Profit Center Accounting

Brocadero already has three manufacturing plants. Brocadero has invested $10 million to
set up a new manufacturing plant in the US.
After a year, the company wants to find out the contribution of the new plant to the profit
of the company. For this, you need to perform the Profit Center Accounting transaction.

Page 2 of 3: Profit Center Accounting

Here is the organizational structure input for the Profit Center Accounting transaction:

Graphic
Description of the data flow in the Profit Center Accounting transaction:
When you perform the Profit Center Accounting transaction, the data comes from
the organizational structure and master data components of the CO module. The
organizational structure input is company code (C001) and controlling area code
(0001).
Description ends.

company code: C001 to specify the company for which you want to perform the transaction, for
example Brocadero

controlling area code: 0001 to record the costs incurred by Brocadero at the new plant located in
the US

Page 3 of 3: Profit Center Accounting

The master data input for the Profit Center Accounting transaction is profit center code:
996801 to record the income earned by the manufacturing plant located in the US.

Graphic
Description of the data flow in the Profit Center Accounting transaction:
The master data input is profit center code (996801).
The output is a report that shows the contribution of the new plant to the profit of
the company.
Description ends.
The output is a report that shows the contribution of the new plant to the profit of the
company.

Page 1 of 2: Profitability Analysis

Brocadero wants to analyze the profit of the company at the product level. For this, you
need to perform the Profitability Analysis transaction. When you perform this transaction,
the data comes only from the organizational structure components of the CO module.

Page 2 of 2: Profitability Analysis

Here is the organizational structure input for the Profitability Analysis transaction:

Graphic
Description of the data flow in the Profitability Analysis transaction:
When you perform the Profitability Analysis transaction, the data comes from the
organizational structure components, company code (C001) and operating
concern code (PC01), of the CO module.
The output is a report that shows the profit of the company at the product level.
Description ends.

company code: C001 to specify the company for which you want to perform the transaction, for
example Brocadero

operating concern code: PC01 to decide at which level (product, customer, price, and sales
organization) you want to analyze the profit of Brocadero

Question
Your company wants to calculate the costs that are incurred while manufacturing a
product. For this, you need to perform the Product Costing transaction.
Here is the information that comprises the organizational structure and master
data inputs and output of the Product Costing transaction.
Match each piece of information with the appropriate category.
Options:
A.

Master data input

B.

Organizational structure input

C.

Output

Targets:
1.

A report that shows the costs incurred while manufacturing a product

2.

Company code: C001

3.

Controlling area code: 0001

4.

Cost element code: 11212

Answer
A report of costs contains the result of manufacture and is thus an output.

The company code is an input of the Product Costing transaction.

The area code is an input of the Product Costing transaction.
The cost element code is the master data input of the Product Costing transaction.
Correct answer(s):
Target 1 = Option C
Target 2 = Option B
Target 3 = Option B
Target 4 = Option A
You can compare and contrast Controlling transactions and data with Financial
Accounting transactions and data.

Supplement
Selecting the link title opens the resource in a new browser window.

Job Aid
Access the job aid Controlling Action Inputs to review the inputs necessary to
perform controlling actions.

Summary
SAP R/3 provides transactions to carry out everyday tasks related to controlling costs.
The transactions are Cost Center Accounting, Internal Orders, Product Costing, Profit
Center Accounting, and Profitability Analysis.
The organizational structure components of the CO module are client, company code,
controlling area, and operating concern.
The master data components of the CO module are cost element, cost center, and profit
center.
The organizational structure and master data components are referenced when you
perform CO transactions.

Table of Contents

| Top of page |
| Learning Objective |
| 1.Controlling transactions |
| 2.Organizational structure data |
| 3.Master data |
| 4.Data flow in Controlling |
| Summary |
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