cancel
Showing results for 
Search instead for 
Did you mean: 

Difference between Business Area & Profit Center Accounting

Former Member
0 Kudos

Can anybody help me out by explaining the difference between Business area and profit center? Because both the concepts are used to define a product line / function in a business,so why they are different?

Also let me know why business area concept is replaced by profit center?

Regards

Sagar

Accepted Solutions (1)

Accepted Solutions (1)

Former Member
0 Kudos

Hi,

Business area will have many profit centers. For example Vehicle is a business area in a company. Vehicle can be cars and Bikes etc. Here Vehicle is business area and Cars and Bike are profit centers. In broad Vehicle is a profit center. But as it has sub areas those are profit centers. So profit centers cannot be replaced with business area and vice versa. We can replace business area by Profit centre, only condition is that it should be in same controlling area. The business area is more like a business unit of a company. You can have multiple profit centers within a business area.

Main distinguish factor is that distribution and assessment in possible in profit center but not in business area.

One more distinction is that Business area need not be attached to any organisation structure. But profit centres can be created only under the controlling area. Business area can be across controlling area.

Business area concept is used for making strategic decisions by the management whereas the primary purpose of profit centre accounting is responsibility accounting.

Regards,

Satish Muvva.

Former Member
0 Kudos

Thanks Satish,

I am clear on my doubt to a considerable level. However, if there is anything specific regarding Business Area and Profit Center, I would certainly come up for the help.

With Regards

Sagar

Answers (2)

Answers (2)

Former Member
0 Kudos

hi

PCA:

Created per Controlling Area & Company Code [System validation at Company Code Level]

Data:Manual Entry

Derivation by referred cost object

Derivation from offsetting item based on the above mentioned rule

Periodic processing:Monthly period closing program to be executed

Distribution / Assessment possible [PCA Documents are created which can be verified by the auditor]

Report showing individual and all PCA totals to match Company Code Values GL Account wise can be created

other:Consolidation at PCA level

Multiple Valuation possible for PCA at

FI Level

Consolidation Level

Material Ledger concept for PCA for parallel valuation of materials

Business area:Independent Dimension

[Can be used across company codes u2013 Manual validation required to ensure Company Code-Business Area parity]

Data: Manual Entry

Derivation from Organization structure

Derivation by referred cost object

Derivation from offsetting item based on the above mentioned rule

Periodic processing:Monthly period closing program to be executed

Distribution / Assessment NOT possible

Report showing individual and all PCA totals to match Company Code Values GL Account wise available

Others:Consolidation at BA level

Multiple Valuation not possible at BA level

Material ledger concept NOT extended to Business Area

Further development for Business Area discontinued [Note 321190]

thanks

Srilaskhmi

iklovski
Active Contributor
0 Kudos

Hi Sagar,

You can read this note 321190 (Difference between business area and profit center).

Regards,

Eli