Finance

[Former Member]

what is different between business area and profit center?

[Former Member]

Hi Kiran,

Both are for the internal reporting purpose. you can draw financial statements at Business area or profit center level. But because of the certain advantages profit centers are preferred than business area. please go through the below links for more detailed discussion on the topic.

http://wiki.sdn.sap.com/wiki/display/ERPFI/Business+Area+Vs.+Profit+Center+Vs.+Profitability+Segment

http://scn.sap.com/thread/353655

Br,

Venkat

[Former Member]

Hi Kiran,

Business area is an organisational unit which corresponds to the specific business segment or area of responsibility. Identification of business area helps in segment reporting of a company in its financial statements. Business areas can be identified based on the products of the company or based on geographical area.

Profit centers are internal areas of a company that have the responsibility for achieving target profits or productivity goals.

The objective of business area is more for reporting purposes whereas profit center allows to analyse areas of responsibility and to delegate responsibility to decentralised units (eg., the various divisions within a company). Thus, profit center are basically treated as "companies within a company" and ensures effective control.
Profitability Segment corresponds to market segment. The market segments can be defined as products, product groups, customers, customer groups, geographic areas, etc. For example, a company may wish to analyze profitability for a specific group of products that the company sells to a particular customer (or group of customers). When setting up CO-PA, the company will have broad flexibility to choose whichever characteristics are relevant for defining the company's market segments. Each unique combination of characteristic values (e.g. sales of product A to customer X) defines a profitability segment.

Another viewpoint:

Difference between Profit Center and Business Area

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 is 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.

Link in HELP: http://help.sap.com/saphelp_erp2005/helpdata/en/ff/277203deea11d3b5b4006094b9b0a5/frameset.htm

Regards,

Sri.....

[Former Member]

Hi Kiran,

There is difference between BA and PC as following.

Business Area:

Business area is an organizational unit of financial accounting that represents a separate area of operations or responsibilities within an organization and to which value changes recorded in Financial Accounting can be allocated.

Part of a company, you can create financial statements for business areas, and you can use these statements for various internal reporting purposes.

Profit Center:

An organizational unit in accounting that reflects a management-oriented structure of the organization for the purpose of internal control.

Operating results for a profit center can be analyzed using either the cost of sales approach or the period accounting approach.

By analyzing the fixed capital as well, you can expand your profit center for use as an investment center.

The main differance between PC and BA..

1.BA is a part of organization. we can withdraw Balance sheet and P&L a/c.

2.PC is part of business segment. we can not withdaraw BS and P&L a/c, We will get Internal reports profit center wise.

Thanks

Mallikarjuna