Income GLs as Primary cost elements (Cat 1)

[Former Member]

Hi,

At my clients place, some of Income GLs are created as Primary Cost elements with Cat 1 and they are exempted from budgetary control. I would like to know what would be the reason behind this.., pls. note Profitability Segment is not active.

Regards,

Khan

[Former Member · Accepted solution]

I assume you want to know why they are 1's, and not why they are exempt from budgetary controls?

I also assume that these postings go to cost centres?

And I further assume that you were wondering why they were not created as 11's?

And that is then also the answer - they were created as 1's so that they can post to cost centres. GL accounts are created as 11's or 12's when the postings need to happen from a sales order. In that case the postings can only go to revenue enabled cost objects, e.g. Internal Order or WBS made billing relevant, or to a Profitability Segment in Profitability Analysis.

[Former Member · Accepted solution]

Thanks Mr. Piet & Mr. Banan,

I got your point, but we have revenue enabled Internal Orders and postings happen from Sales Orders, ( I mean once bill is generated ) and we inturn settle to different Cost Centers. Here what is the logic behind creating a Income GL as 1's and exempt it from budgetary control.

Pls. clarify.....

Thanks,

Khan

[iklovski · Accepted solution]

Hi,

There is no logic to control budget for income accounts (imagine, that you'll reject an income due to 'lack' of budget). However, including it in controlling, by defining it as cost element, gives complete picture of P&L accounts in CO module.

Regards,

Eli

[Former Member · Accepted solution]

The same logic applies, as you cannot post 11' onto cost centres, you can also not settle them from order/wbs into cost center.

[Former Member]

thanks, answered

[Former Member]

The reason to set income accounts as primary cost elements category 1 is to get true postings in cost centers instead of statistical postings. If they were set as category 11, only statistical postings to cost centers will occur and in this case revenues are ignored in activity price calculation and therefore not included in the allocation price of activity type.

When revenue elements are in the form of a credit memo, the costs need to be taken into account and in this case businesses use category 1 instead of 11, so the posting will show as negative costs in cost centers