difference of profit center and cost center

[Former Member]

hi,

may i know what is the difference for these 2?

if revenue and expense also go to cost center, then what is this profit center? both also cost object?

thanks

[Former Member]

Hi!

The difference between a Cost Center and a Profit Center is that the Cost Center represents individual costs incurred during a given period and Profit Centers contain the balances of costs and revenues.

Thus cost center (For different functional areas like MArketing, HR, Production, Information Systems etc..) carries cost only for specified period and profit center carries cost and revenue analysis for specified characteristics (It can be divisions, product lines, functions etc...).

Hope it will clear you. Pls revert back for further query.

Thanks & Regards,

Taral Patel

[Former Member]

hi,

thank you so much of the reply. point given.

i need to further ask, hope can get the reply by point form.

1) what does it mean by revenue could be posted to cost center on statistical level? i did post revenue to cost center for refund. can explain?

2) only p&l account for cost center whereas profit center can have balance sheet account posted?

3) what does it mean cost center represents individual costs. individual cost mean?

4) can cost center has revenue? why cost center ONLY carries cost?

5) what do you mean profit center contains balance of coss and revenue?

6) cost center for specific dept whereas profit center is by characteristic?

thanks

[iklovski]

Hi,

1) Cost centre (as it follows from it's name) serves as cost collector. Therefore, revenues could be posted on cost centre only statistically; some true object is required (I/O, WBS, PCtr) to post revenue.

2) Right

3) Do not mind this remark, it's completely not accurate.

4) See point 1

5) See point 3

6) See point 3

Regards,

Eli

[iklovski]

Hi,

Cost centre can collect costs only. Revenues could be posted to cost centre on statistical level. Additionally, CO documents are created for P&L accounts (except for special cases for assets and down payments with proper customization), while PCA documents are created for any relevant FI doucment including balance sheet accounts. Additionally, you can assign your assets and liabilities to profit centres and build balance sheets on this level.

Regards,

Eli