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Table of contents

Introduction........................................................................................................................ 4
1. Define Functional Area............................................................................................ 6
2. Activate Cost of Sales Accounting for Preparation...........................................10
3. Updating Functional Areas in Master data .........................................................11
3.1 Enter Functional Area in G/L Account Master Data .......................................11
3.2 Enter Functional Area in Cost Element Master Data .....................................21
3.3 Enter Functional Area in Cost Center categories...........................................28
3.4 Functional areas in the Order types .................................................................29
3.5 Enter Functional Area in Cost centers .............................................................36
4. Assign Scenarios and Customer Fields to Ledgers..........................................40
5. Define and Activate Substitution for Cost-of-Sales Accounting ......................43
6. Activate Cost of Sales Accounting.......................................................................85
7. Value flow in cost of sales accounting ................................................................86
7.1 Balance in Process orders. ................................................................................86
7.2 Posting using cost center as an assignment object.......................................95
7.3 Derivation from GL account ...............................................................................96
7.4 Postings to Real Internal order ..........................................................................98
8. Reports in Cost of Sales Accounting. ...............................................................109
8.1 Create Library.....................................................................................................109
8.2 Create report ......................................................................................................114
8.3 Create Report Group.........................................................................................138

Introduction

The profit and loss statement of a company can be created according to two
different methods:
Period accounting
Cost of sales accounting

Period accounting is the traditional way of preparing a profit & loss account
showing income and expenditure as various heads of expenses.

Cost of sales accounting method compares the sales revenue for an
accounting period with the total costs incurred for generating the sales. The
expenses are shown as per the functions undertaken by the company.
Functions carried out by an organization are typically admi nistration, advertising,
marketing, Research & Development, Stock keeping etc.
These functions are defined as functional areas in the cost of sales accounting
approach.
Cost of sales accounting identifies where costs originate in a company.

In this document we use the above concept and use this functionality in a
more powerful way to reconcile the FI and CO module and enable to do a
fast close of the month end closing activities.

Often in the month end process we come across situation where the FI and the
CO-PA module profits do not match. This could be on account of various
reasons.

We have tried to list a few of them keeping in mind the cost of sales
functionality:-

1) All production orders/process orders were settled in the month end closing. It
was later found that somebody from PP team (shop floor) has posted some
entries on the process orders after the settlement was done in the reporting
period. The entries were posted when the period was open and some of the co
closing activities were being executed.
RM consumption Debit $5000 (process order)
RM Inventory Credit $5000
This has resulted in a mismatch between FI and COPA module to the extent of
$ 5000, since the process order has remained unsettled.

A direct report is not available in Standard SAP which lists down the process
order having the balance for the reporting month.
It really becomes a nightmare for the support consultant to find out the relevant
production/process orders which is not settled.

Solution: We use the cost of sales accounting functionality to help us find out the
relevant production/process orders.

2) All WBS (Work break down structure) elements /Network in the project system
modules were settled in the month end closing.

It was later found that somebody from PS team (Project team) has posted some
entries on the WBS after the settlement was done in the reporting period.
Expenses Debit $15000 ( WBS)
Vendor Credit $15000
This has resulted in a mismatch between FI and COPA module to the extent of $
15000, since the WBS/Network has remained unsettled.
A direct report is not available in Standard SAP which lists down the process
order having the balance for the reporting month.
It really becomes a nightmare for the support consultant to find out the relevant
production/process orders which is not settled.

Solution: We use the cost of sales accounting functionality to help us find out the
relevant WBS/Network.

We can also use this functionality to trace balance on the real internal orders/
plant maintenance orders and CO orders.

We therefore recommend implementing the cost of sales accounting
functionality as an additional check point for the month end closing
process.


Lets proceed for the configuration of cost of sales accounting.




1. Define Functional Area


SAP Customizing Implementation Guide Financial Accounting (New) Financial
Accounting Global Settings (New) Ledgers Fields Standard Fields Functional
Area for Cost of Sales Accounting Define Functional Area

A functional area is an account assignment characteristic that sorts operating
expenses according to functions.
Functions carried out by an organization are typically administration, advertising,
marketing, Research & Development, Stock keeping etc.
These functions are defined as functional areas in the cost of sales accounting
approach.

Let us create the functional areas such as:-
Sales
COGS
Variance Prod orders
Other Var. Prod cc
Valuation diff. in stocks
Commission expenses
Marketing costs,
Administration costs and so on.






Click on


Update the following:-










Click

Update the following:-








Click on























2. Activate Cost of Sales Accounting for Preparation


SAP Customizing Implementation Guide Financial Accounting (New) Financial
Accounting Global Settings (New) Ledgers Fields Standard Fields Functional
Area for Cost of Sales Accounting Activate Cost of Sales Accounting for Preparation

Cost of sales accounting is activated for our company code as a part of the preparation.
It makes the Functional area field available for entry in the master data of G/L accounts,
cost elements and cost center master data allowing you to enter the functional area.
No functional area will yet be derived and updated for posting.





Update the following







Click on



3. Updating Functional Areas in Master data


You can add the functional area to the master data of various objects:
G/L account
Cost element
Cost center
Orders
Order type
Internal order
Sales order for make-to-order production and requirements class
Maintenance, service, and QM order
Production order, process order, product cost collector and cost object
hierarchy
WBS elements
Project profile and project definition
WBS element
Networks
Network type
Network header
Network activity

During posting, the system derives the functional area from the master data of
the assigned objects.



3.1 Enter Functional Area in G/L Account Master Data

SAP Customizing Implementation Guide Financial Accounting (New)
Financial Accounting Global Settings (New) Ledgers Fields Standard
Fields Functional Area for Cost of Sales Accounting Enter Functional Area
Enter Functional Area in G/L Account Master Data

The functional area field is only ready for input in the master data of P&L
statement accounts.




Click















Update the following:-





Click




Click



Click

Update the following:-



Update Z101 in WIP change account.


Update the following:-




Then select



And select






Click on




Click






3.2 Enter Functional Area in Cost Element Master Data


SAP Customizing Implementation Guide Financial Accounting (New)
Financial Accounting Global Settings (New) Ledgers Fields Standard
Fields Functional Area for Cost of Sales Accounting Enter Functional Area
Enter Functional Area in Cost Element Master Data

Update the following:-




The functional area automatically gets updated in the cost element which
can be seen below:-




Update functional areas in secondary cost element




Click





Take a drop down in the field








Click on




Click

Likewise update the following secondary cost elements with functional area as
follows:-

Cost element Cost element
description
Functional
area
996002 Administraton overhea E013
996003 Marketing Costs E005
996004 Advertising costs E006
996005 Stock Keeping & Pac E007
996006 Outward Freight Tran E004
996007 Comission Expenses E001
996008 Other Vari. Prodn cc C003
996009 Gain/loss sale of fa

E011
996010 Write back of Receiv E008
996011 Write Off of Receiva E009



3.3 Enter Functional Area in Cost Center categories


SAP Customizing Implementation Guide Financial Accounting (New)
Financial Accounting Global Settings (New) Ledgers Fields Standard
Fields Functional Area for Cost of Sales Accounting Enter Functional Area
Enter Functional Area in Cost Center Categories


This can be used to default functional area when cost center categories are
selected.




We will not update here anything since we will be manually updating cost centers
with functional areas.


Here you can set functional areas as defaults in cost center categories, when you
update it in the cost center master data.


3.4 Functional areas in the Order types

Here we assign functional areas in the order types.

Process order type

SAP Customizing Implementation Guide Production Planning for Process
Industries Process Order Master Data Order Define Order Types

You can update functional area Z101 in process order type, though this step will
not be required since we are implementing substitution. Nevertheless we still
update the functional area.






Double click





Click on











Production order type

SAP Customizing Implementation Guide Production Shop Floor Control
Master Data Order Define Order Types

You can update functional area Z101 in production order type, though this step
will not be required since we are implementing substitution. Nevertheless we still
update the functional area.






Double click





Click on







Click on


3.5 Enter Functional Area in Cost centers

We will now update functional area in all our cost center master data.

Transaction code: KS02

Update the following:-









Update functional area C003






Click on




Click

Similarly update all other cost centers with relevant functional areas.














4. Assign Scenarios and Customer Fields to Ledgers

SAP Customizing Implementation Guide Financial Accounting (New) Financial
Accounting Global Settings (New) Ledgers Ledger Assign Scenarios and
Customer Fields to Ledgers

The cost of sales accounting scenarios needs to be assigned to the ledger which is
being planned to use.

The Cost of Sales accounting scenario is generally assigned to the Leading ledger as
can be seen below. We do not need cost of sales accounting for other ledgers.





Select

Double click





Cost of sales accounting scenario is not assigned to the Ledger Y1 as can be
seen below.





Cost of sales accounting scenario is not assigned to the Ledger Y2 as can be
seen below.



5. Define and Activate Substitution for Cost-of-Sales
Accounting


SAP Customizing Implementation Guide Financial Accounting (New) Financial
Accounting Global Settings (New) ToolsValidation/Substitution Define and
Activate Substitution for Cost-of-Sales Accounting



The system derives functional area for the following postings;-
1) Primary postings (posting in Financial accounting) to a profit and loss account.
2) Secondary postings (allocations in controlling)

The functional area is not derived in the following cases:-
1) Posting to balance sheet accounts
2) Entry of statistical key figures

The system derives the functional area during document entry based on the information
available in the coding block.

Functional area is derived as follows:

1. From the master records of the assigned objects (cost centers, internal orders, wbs,
networks, plant maintenance orders).
If an object (cost centers, internal orders, wbs, network, plant maintenance orders) is
used during aGL posting, the system checks whether a functional area has been
entered in the master record of the object. The system retains this functional area
provisionally from the object.
2. From the master record of the G/L account or the cost element
The system checks whether a functional area is entered in the master record of the cost
element or the profit and loss account. This functional area overwrites the functional
area derived from the assigned object (cost centers, internal orders, wbs, network,plant
maintenance orders).

3. Using substitution for the component Financial Accounting, event 0006. If a functional
area has already been determined, this is overwritten with the functional area obtained
via substitution.


Standard derivation therefore does not work for our requirement of populating
functional areas in production/process order, plant maintenance orders, wbs and
internal orders.
Reason the standard derivation will not work since it might be overwritten by functional
area of gl codes.


We have to define substitution for the application component FI (in case New GL is not
is used) callup point 0005.
When New GL is used the substitution needs to be defined using callup point 0006.

When creating the substitution rule, the following information sources are available for
deriving the functional area (applicable for Old GL):
Fields of structures ACCIT and ACCHD
Master records of the assigned CO objects

We will create substitution rule to populate functional areas in the process orders, sales
orders for revenue and costs, plant maintenance orders, work break down structure,
internal orders so as to have a control on the balance on these orders at month end.




Click on


Update the following:-




Select call up point 0006 since we have implemented New GL.

Update the following:-






Click







Create







Click




Select

Click





Click

Let us now set up a substitution rule to populate functional area Z101 in
production/process/CO orders.

Update the following:-






Click



Click








Double click







Double click





Double Click

Double Click




Update the following:-






Click




Double Click




Double Click

Double Click

Double Click



Update the following:-



Click






Double Click

Double Click

Double Click

Double Click



Update the following:-









Click






Click






Click





Update the following:-



Click on




Click

Let us now set up a substitution rule to populate functional area Z102 in plant
maintenance orders.

Click




Select



Click




Click




Update the following:-




Click



Double click

Double click

Double click

Double click



Update the following:-







Click




Click on


Update the following:-







Click

Let us now set up a substitution rule to populate functional area Z103 in sales
orders with revenue and costs.


Click





Click




Click





Update the following:-






Click





Double click

Double click

Double click

When Classic GL (or old GL) is implemented use ACCIT-KDAUF

Double click




Click




Click





Update the following:-




Click on
Click

Let us now set up a substitution rule to populate functional area Z104 in Capital
internal orders or real internal orders.


Click




Click




Click



Update the following:-



Click





When Classic GL (or old GL) is implemented use ACCIT-AUFNR and
ACCIT-CO_KAAUF and ACCIT-AUTYP

Double click




Double click

Double click

Double click



Click

Double click


Double click


Double click

Double click




Update the following:-



Double click

Double click

Double click

Double click




Update the following:-



Double click

Double click

Double click

Update the following:-


Double click

Double click

Update the following:-





Double click

Double click


Double click

Update the following:-


Double click

Double click

Update the following:-







Click





Click


Click










Click

Let us now set up a substitution rule to populate functional area Z107 in
Networks.

Click







Update the following:-




When Classic GL (or old GL) is implemented use ACCIT-NPLNR


Click




Click

Let us now set up a substitution rule to populate functional area 9999 (Dummy)
where no functional area information is available from master data or the
assigned object.










When Classic GL (or old GL) is implemented use ACCIT-FKBER



Click

Update the following:-








Click on



Click till you reach




Take a drop down in the field Activation level



Click on









6. Activate Cost of Sales Accounting


SAP Customizing Implementation Guide Financial Accounting (New)
Financial Accounting Global Settings (New) Ledgers Ledger Activate
Cost of Sales Accounting

Having configured the cost of sales accounting we are now ready to activate it.
This means that when you post to the company code, the functional areas are
derived and updated.





Now change the status to active




Click on




7. Value flow in cost of sales accounting


7.1 Balance in Process orders.


Use tcode KE5Z (Profit center line item display):-


Update the following:-


Functional area is Z101


Update the following:-








Click




Let us know bring in the process order and the functional area as additional fields

Click

Position cursor on Functional area



Press Ctrl button and click







Click





Click





Click






Click






Click




The balance on process orders are 500,000 and the process orders numbers are
as seen above.

Click to save the variant for later use





7.2 Posting using cost center as an assignment object

The functional area is derived from the cost center since the GL in this case is
not maintained with functional area.









Credit posting on cost centers




7.3 Derivation from GL account

Postings to the Work in Process Change account is from GL account master data






7.4 Postings to Real Internal order

In the below example we are posting an expense to a real internal order.




Click




Double click




The functional area Z104 is now derived from the substitution rule set by us.


Click

Click on









Settlement of internal order:-




Click




Click




Click




Double Click




Click



Click




Click






Use KE5Z to display the balances on internal order





Click




8. Reports in Cost of Sales Accounting.

You can create your own reports in Cost of sales accounting. We use the profit
center to generate a cost of sales report for us.

8.1 Create Library
Path:-
SAP menu Accounting Controlling Profit Center Accounting Information
System Tools Report Painter Report Writer Library GR21 - Create

Transaction code GR21
Standard Library 8A0 does not have the functional area activated. Therefore we copy
from 8A0 and create a new library.







Click





Click




Click







Click on

8.2 Create report

Path:-
SAP menu Accounting Controlling Profit Center Accounting Information
System Tools Report Painter Report GRR1 - Create

Transaction code: GRR1


Click





Click and update description



Double click




Select



Click





Update the following:-



Click









Update the following:-



Click

Click





Similarly in the next rows update the following:-




Click on the row below

Select




Click
Click
Click

Click




Update the following:-









Double Click







Click







Click
Update the following:-




Click

Double click









Click




Click






Click




Click

Click on


Also update all Z functional areas.


Click



Click

Click














Select


Click to move the fields


















Update the following:-




Click

Click on
Click



8.3 Create Report Group

Path:-

SAP menu Accounting Controlling Profit Center Accounting Information
System Tools Report Painter Report Writer Report Group GR51 -
Create

Transaction code: GR51

Update the following:-












Update the following:-




Click

















Update the following:-



Click on

Click





Click

Click

Click







Update the following:-





Click on
Click on


Click



Click

Update the following:-


Click


Double click




Click




Select





Hope you enjoyed reading cost of sales accounting

Do insist and implement cost of sales accounting for your customers, since it has
a lot of advantages for them as seen above.