SAP Profit Center Accounting – System Guide with Detailed Overview

Last Updated on October 26, 2022 by Pradeep

SAP Profit Center – Introduction

Likewise, it lets you set up our profit centers according to product (product lines, divisions) geographical areas (regions, offices or production sites) or function (production, sales). Furthermore, it also lets you calculate internal operating results for the profit centers.

PC as an Organizational Sub-Unit

It represents an organizational sub-unit that operates independently on the market and bears responsibility for its costs and revenues.

You can properly organize your organization into profit centers by assigning the Master Data of each profit relevant object to the profit center. This includes-

• Materials
• Cost Centers
• Orders
• Projects
• Sales Orders Assets
• Cost Objects

PC For Business Transactions

All the business transactions in the S4 HANA system which are relevant for cost and profits are updated in the PCs at the same time they are processed in the original module and organized according to cost elements as well as revenue elements. This transforms all the flows of goods and services within the company into exchanges of goods and services between profit centers. This profit center structure applies to both actual postings and profit center data.

PC as an Investment Center

It is also possible to treat a PC as an investment center. In addition to the flows of goods and services, you can transfer selected balance sheet line items to profit centers periodically. These include:-

• Fixed Assets
• Payables
• Receivables
• Material stocks
• Work in process (WIP)
• & more

This makes it possible to calculate such key figures as profit on sales, return on investments and Cash Flow.

Important to read:- Material Ledger in SAP S/4HANA

Assigning SAP Profit Center to Cost object

Follow the below path for assigning PC to cost objects in the SAP Finance S/4HANA application.

SAP Easy Access => Accounting => Financial Accounting => General Ledger => Master Records => Profit Center => Current Settings

Profit Center Table in SAP

It is the place where the relevant data is stored in RDBMS.

(RDBMS – Relational Database Management System. It is a storage place that keeps data of everything related to SAP applications).

Below is the table with the description of each element.

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How to Create Profit Center in S4 HANA

To create a Profit center in SAP S/4HANA, you need to follow the below steps. Refer to the image for a better understanding.

SAP Easy Access => Accounting => Controlling => Profit Center => Master Data => Profit Center => Individual Processing => Create

The Tcode KE51 is used to create Profit Center Master data.

There is an alternate way also to create it in S/4HANA. Here it is-

SAP Menu => Accounting => Financial Accounting => General Ledger => Master Records => Profit Centers => Individual Processing => Create

How to Change a Profit Center?

As shown in the image above, the path to modify is the same as it to create. Just below the create option, you will find the option to change. The Tcode is- KE52.

Read Related: SAP Controlling Interview Questions

SAP Profit Center Report

With the help of Profit center reports, you can see the revenue and expense reports of a business unit. These are the reports that the system generates at various times or periodically and save into the profit center reports segment.

This section further helps SAP users and consultants to get a quick view of all revenue-expenditure data. These are mostly of use to SAP S/4HANA Finance consultants as they are the ones who deal with the reports work commonly.

Profit Center Report Tcode in SAP – KE5Z.

Here is the directional path:-

SAP Easy Access => SAP Menu => Accounting => Controlling => PC accounting => Information System => Reports for PC Accounting => Line Item Reports => KE5Z – Profit Center: Actual Line Items.

SAP Profit Center Hierarchy

It is the process of arranging PC Groups and PC Master Data. It is a part of the Controlling Area.

The directional Path:-

SAP menu => Accounting => Financial Accounting => GL => Master Records => PC => Standard Hierarchy

SAP Profit Center Hierarchy Tcode – KCH1

Also Read: Internal Order in SAP

Dummy or Default Profit Center in SAP

In practice, you may forget to assign a particular controlling object or material to a Profit Center. In such a case, if costs or sales are posted to this object, the corresponding data is posted to the dummy or the default Profit Center. It is in S4 HANA Finance as part of Profit Center Accounting.

This subsequently, ensures to make that reconciliation between EC-PCA and Financial Accounting possible in such instances. You can also discover missing assignments by analyzing the postings to the dummy profit center. And also to know what you should do during the period-end procedure.

SAP Profit Center Determination in Sales Order

Transfer from Sales and Distribution – It is necessary to assign SD Sales Order to profit centers to reflect receivables, sales revenues and sales deductions on profit centers. 

The profit center assignment is also passed on from the sales order through the supply chain. Here is the path:-

Sales order => Delivery note => Goods issue => Billing Document.

This means that when you post the goods issue, the corresponding revenue value for goods is also passed on to the profit center of the sales order.

Parts of Sales Order

You can divide Sales orders into Header Data and Item Data.

The assigns each order item separately to a Profit Center. This assignment is passed from the sales order to the delivery note and then on the billing document.

So, when any goods will be issued, there will be a change in the finished goods stock automatically. And thus, it will update the PC as well.

The SAP system transfers the following data from bills and debit and credit memos to Profit Center Accounting:-

• Revenues
• Sales deductions ( shipping, discount etc)
• Accruals

The profit center is assigned at the item level of the sales order. As a default, the system proposes the profit center of the material in the supplier plant.

Related: Receivables Management in SAP S/4HANA

Profit Center Actual Line Item in SAP

Whenever any transaction related to the profit center is posted into the system, it generates profit center actual items. So we can get this report by using the Tcode KE5Z.

Easy Access=> Accounting => Controlling => PC Accounting => Information System – Reports for PC Accounting => Line Item Reports => KE5Z- Profit Center: Actual Line Items

Also Learn: All important SAP FICO Tcodes

EndNote

Hope many of your doubts have been cleared with this guide. A very important aspect of PC is the Activation part. Every SAP S/4HANA Finance Consultant must know how to activate the profit center Accounting in SAP S/4HANA. Without this, your configuration is incomplete. However, this thing can be best learn practically, through proper SAP S/4HANA Finance training. Even the above-mentioned guide and steps also you must do in system to learn them well.

Moreover, SAP Financials is all about practical. The more you do it in system, the better you become skilled on it.

Watch Video: Use of SAP Profit Center Accounting and Internal Order in O2C