Sep 30, 20233 min read

Profit Center in SAP FICO

Updated: Aug 8

Profit Center Accounting (PCA) in SAP

Profit center accounting in SAP is a sub-module of SAP CO that enables organizations to track and analyze the financial performance of different profit centers within an organization. PCA allows companies to divide their organizational structure into distinct profit centers. PCA is closely integrated with other SAP modules, such as FI-GL, CO-Cost Center Accounting and CO-Internal Orders.

In order to create Profit Centers for company code we need to Activate the Profit Center Indicator for the Fiscal year in Controlling Area.

How to Activate Profit Center Accounting in SAP?

Path: SPRO>IMG>Controlling>Profit Center Accounting>Basic setting>Controlling area Settings>Maintain Control area Settings OR (by using T-Code OKE5)

1. Standard Hierarchy - When you maintain the settings for a controlling area, you must enter the name of the standard hierarchy for the profit centers assigned to that controlling area.

When you create a profit center, you must assign it to an end node of the standard hierarchy. This ensures that the standard hierarchy contains all the profit centers in the controlling area.

2. Profit Center Local Currency - You can define one extra currency for each controlling area. In the transaction data, the system updates this currency, and the transaction currency and local currency.

The currency types - Group currency (30), CO Area currency (20), or a currency that you can select for Profit Center Accounting, the profit center local currency (90), which must be maintained separately.

3. Active Indicator - "✔ " the check box to activate the Profit center Accounting for your controlling for the Fiscal Year.

Path to configure Profit Center Accounting:

We can utilize the features of Profit center Accounting from the SAP Easy access screen and also from IMG screen.

Profit Center Standard Hierarchy -

The Profit Center standard hierarchy is a tree structure which displays the organization of all the profit centers in one controlling area.
The structural elements in the standard hierarchy are the profit center area and the summarization area.

Steps to create profit center standard hierarchy- BAJAJ.

STEP 1: Enter your Controlling Area and Profit Center Group.

STEP 2:

Right-Click on Profit center group and select Create profit center

or Create group (same level or Lower level).

STEP 3: Enter the Basic details related to Profit center like Name, Person responsible, Segment, analysis period.

Profit Center Standard Hierarchy-BAJAJ

Profit Center Group - [It is 4 to 10 Digit Alphanumeric Code in SAP) (T-Code KCH1)]

A Profit Center Group is a grouping or categorization used to organize and manage Profit Centers within an organization.
Profit Center Groups provide a higher level of management control, enabling managers to assess the performance of larger segments of the organization.
Profit Center Groups can be used for budgeting and planning purposes.

STEP 1: Enter the Controlling Area and then name for profit center group.

STEP 2: We can create Profit center and Profit Center Group directly in this standard Hierarchy method.

Profit Center - [It is 4 to 10 Digit Alphanumeric Code in SAP) (T-Code KE51)]

A Profit Center is a key organizational unit used for internal management accounting and reporting purposes.
These profit centers can represent various business units, departments, product lines, geographic regions, or any other relevant segment of the company.
Profit centers help establish fair transfer prices for goods and services exchanged between different segments of the organization.
Profit centers are essential for budgeting and planning processes, assist in setting financial targets and expectations for each unit.

Steps to Create Profit Center:

STEP 1: Enter Controlling Area and Profit Center.

STEP 2:

Enter the fields like Name, person responsible, profit center group, segment.

then, first 'save as inactive' and then select 'Activate'.

How to Activate the Inactive profit center?

STEP 1: Select Company Codes and Tick "✔ " Check box in Assigned Column.

STEP 2: Select the check box of Inactive profit centers to activate and click on [✔].

Now, Profit Center is Active.

NOTE: It is recommended 'not to Delete any Profit Center' - Deleting a profit center could have cascading effects. It is generally better to Inactive or archive profit centers rather than deleting them.

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