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What is the use of profit center in sap?

Former Member
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Dear Guru's,

This may be a very small and stupid question but please cooperate....

I would like to know why do we have the Profit Centers in SAP or what is the use of having profit centers even if we don;t have the New G/L functionality activated.

I have tried alot to seek the answer but I am unable to get one as if now....

Please reply asap....

Thanks in advance.....

Regards

Sachin

Accepted Solutions (0)

Answers (6)

Answers (6)

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Dear Sachin

Profit Center's role in SAP has been well explained by our SCN experts, and I would like to add that certain business where there are industry clusters & sub industry clusters which can be put up in a hierarchy, this tool benefits a lot.  For example, if an industry is defined under Specialty Chemicals under which there is a sub industry as "Polymer, Fibres & Adhesives" which is sub clustered as:

1. Adhesive Industry

2.Fibres Textiles & Films

3.Masterbatches & Compounds

4.Polymer Producing Industry

When the Sales report under BW is run and configured according to the above break up, each cluster and the sub cluster has got a code based on which the sales break up can be arrived at and this helps in comparing the sales target v the actual performance.  This enables the Sales department bosses to plan the future target over a period of time. 

Similarly even Financial charges, can be clustered as a. Selling expenses, b. Logistics expenses, c. Operational expenses, d Financial expenses etc. and codified accordingly and may also further linked to the Supplier, if the profitability based on the supplier is required.  This is the CRYSTAL process in SAP which facilitates the analysis of this kind.  Hope I have made it clear for you.

Former Member
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  Hi ,

Profit centre is a responsible area where we can get the details to overview the business operation and activity to analysis the business performance , this is also hirer key ...

Former Member
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Profit center is an organizational unit in the Accounting component in the R/3 System. It reflects a management-oriented structure of the enterprise for the purposes of internal control.

  

Use profit centers to portray the following:

  • Units of the enterprise that bear responsibility for their own results, for example, product areas 
  • Corporate strategies, for example: 
    • "Clearing up product line" 
    • Comparing regional/geographic units of the enterprise 
    • "Make or buy" 
    • Where to manufacture

Profit center managers should be able to influence the costs and revenue for which they are responsible.

You do not need to record direct costs, overhead costs and revenue separately. They are entered automatically.

Feel free to revert if you look for any other reply.

Thanks & regards,

Dinesh Lakhotiya

Former Member
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Hi Sachin,

A profit center is an organizational unit in accounting that reflects a management-oriented structure of the organization for the purpose of internal control.

You can analyze operating results for profit centers using the period accounting approach By calculating the fixed capital as well, you can use your profit centers as investment centers

Thanks

Trinath Gujari

former_member204860
Active Participant
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hello ,

The basic purpose of creating a ProfitCenter is to analyse the revenues and costs for a particular product line, or a plant or a business unit. Though you can generate balance sheets and profit and loss accounts per ProfitCenter still a profit center should basically be used as a tool only for internal reporting purposes.    If legally one has to produce the Balance sheets and Profit and Loss Accounts for a profit center then it is advisable to create it as a company code instead of a profit center.    If no profit center is defined then the system will post all the entries in one default profit center.    regards. n.selvakumar.

Former Member
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Hi,

The main use of the profit center is to know about the profits location wise / division wise/ product wise,

By using this profit center concept we can get excat reports about above things.

I think you got my point.

Reagrds.