PROFIT CENTER ACCOUNTING
Profit center accounting is generally is not the regular core component of controlling. It is a part of Enterprise Controlling. The main purpose of Profit center accounting is providing the opportunity to analyze and report to the management regarding internal profitability of sub units. Hence it is called a company code with in a company code. It can capture the financial statements as well as Return on investment also within a company code level. It is called as management tool to analyze the performance of particular organizational unit and compare the variances for taking a strategic decision.
This part of application component is same as the cost center configurations. Here we can plan the profit centers, and compare the data with actual data. The difference between the cost center accounting and profit center accounting, the former one deals with the costs only and the later one deals costs as well as revenues as well. Profit center reporting can be considered as legal valuation also. The sum of all the profit centers reports can be construed as company code legal valuation.
The profit center accounting is a similar functionality of Special purpose ledger. It can be considered as predefined special purposed ledger tool. Before going into the details of Profit Center Accounting, we must set some basic setting requirements.
Business Areas
The function of business areas is to create balance sheets and profit and loss statements below the company code level. Some common uses of business areas are to produce divisional financial statements or SEC segment-level reporting. It is important to note that business area functionality can be duplicated using Profit Center Accounting. The decision to use or not to use business areas should be made early on in the design phase of your project.