why we need to settle cost periodically and year end in ps

[sanjeevc]

Hi Expert,

There are cost element category for primary cost and secondary cost.

1 - Primary costs / cost-reducing revenues

3 - Accrual / deferral per surcharge

4 - Accrual / deferral per debit = actual

11 - Revenus

12 - Sales Discounts

22 - External Settlement

Secondary Cost Element Categories:

21 - Internal Settlement

31 - Order / Project results analysis

41 - Overhead Rates

42 - Assessment

43 - Internal activity allocation

50 - Project related incoming orders: Sales

51 - Project related incoming orders: Others

52 - Project related incoming orders: Costs

61 - Earned Value

i assume primary cost element category is cost collector which cost pick from (FI & MM) and distribute the cost in different cost center with the correspond of G/L

Secondary cost element category is receiver from primary am i right, then which one cost category need to settle and why??.

22 - External Settlement=primary cost=would this cost be settle??

21 - Internal Settlement=secondary cost= even would this cost be settle?? or both primary & secondary cost need to settle.

Regards,

Sanjeev

[Former Member]

Hi,

Already explained why we need to settle the costs on project objects by our friends.

Projects are temporary and costs can not be reside permanently and obviously it needs to be transferred to cost center, profit centers.

Note that reviewing the reports in Management perception is totally differs from from project perspective. Management always reviews the final results profit/loss statement at the profit center level and cost ceters levels in balance sheet and not at the project objects.

Besides that, closing of a project is best practice to be followed for that all the costs to be settled either to CC or PC. You can not keep project in open and let it go for years and it requires to be closed as per industry practice.

In our domain experience during review of project status one must have come across the questions from higher ups how many projects are in active status and open status from last review date to current review date. So it make sense to close the project.

Regards,

Sudhakar

[sanjeevc]

Hi,

Thanx for clarification but my query:

is primary cost and secondary cost both will be settle??

is primary cost element are cost collector and distribute this collected cost to secondary cost element?

even is secondary cost elements are cost collector which have all category statistical or receiver only receiving from primary cost element?

Regards,

Sanjeev

[Former Member]

Hi Sanjeev,

Yes, if you use assessement (transaction KSU5), you will able to settle the costs collected to defined receivers.To answer your enquiry specifically, yes, it settles according to your allocation structure and defined cycle. It could be primary and secondary (please check your cycle).

Regards, Gordon

[Former Member]

Hi,

You can settle directly from cost eleements or you will define allocation structure.

CE category 21 is used for internal settlement and CE 22 is used for external settlement like Asset etc. Please go through the below link which is self explanatory.

http://help.sap.com/saphelp_46c/helpdata/en/9d/1f4b6e5733d1118b3f0060b03ca329/frameset.htm

Regards,

Sudhakar

[Former Member]

Hi Sanjeev,

In short, Assessment was created to transfer primary and  secondary costs from a sender (eg WBS) to receiving controlling objects. It will show the cost accurately according to actual incurred for example cost center.

Regards, Gordon

[Former Member]

Hi Sanjeev,

I think Gordon has answered your query in a crisp fashion.

To answer your main query as to why the costs need to be settled periodically and at the year end, i would say that the project objects are just temporary cost collecting objects and these costs cannot sit on these objects forever. Hence these costs need to settled to a valid reciever periodically which is necessary for reporting purposes. The same applies for closing that happens at the year end.

If you have gone through SAP Help, the basic definition of a project itself says that a project is a temporary endeavour. Hence, these costs need to settled at regular intervals and at year end to allow closing of the project.

Hope this clears your doubts.

Regards,
Gokul

[sanjeevc]

Hi Gokul,

Satisfactory answer for why we need to settle periodic & year end cost.

and would appreciate if you let me know about which cost primary / secondary cost need to settle or both cost (Prim.&Sec.)

Regards,

Sanjeev

[Former Member]

Hello Sanjeev,

You may settle either one or both.

For Periodic reposting/distribution, it will allocate primary costs.

However for Assessment, it allocates both Primary and secondary costs.

Regards, Gordon

[Former Member]

Hi Gokul,

If one allows the project costs/revenues to be there against the WBSEs without settling the same,then  would that be an issue/concern in anyways?

Thanks and Regards

[Former Member]

I dont think there would be any issues or concerns. It entirely depends on how the business wants it to happen. You can very well let the costs and revenues be there on the WBSe's without settling them if you are not going to close the project.

However, i have never come across such a scenario where the costs/revenues are not settled. There are certain Financial rules which a company/business needs to abide by and maintaining the account books properly is one of the mandatory one's.

[Former Member]

Hi Gokul,

I think thats what i wish to get at.....in case i do not settle the project costs/revenues then do the account entries get upset or affected in any adverse way? All the FI-relevant costs/revenues were hit through the account assignment of WBSE. So even if the costs/revenues are there on the WBSE then the finance books are not affected as the proper entries against the GLs have already been accounted for.

So letting the costs/revenues be there on the WBSE should not affect the maintenance of account books. Or does it effect?

Thanks and Regards

[Former Member]

There is no adverse effect as such but this again depends on how the reconciliation happens in your company.Merely having the entries against a WBS will not help in proper analysis of Profit/Loss.

In any project, unless its an Investment Project every company will definitely like to see the Profit/Loss statement. Hope you understand what i am trying to say here. To understand better get in touch with your Finance guys and see how they maintain their account books. This will give you a clear picture.

[Former Member]

Primary Cost Elements:
Cost elements whose costs originate outside of CO and accrual costs that
are only used for controlling purposes.

Secondary Cost Elements:
Cost element that is used to allocate costs for internal activities.