Cost elements - urgent

[Former Member]

Gurus:

I have a basic question.

1. What P&L accounts are created as what category of cost elements (1, 3, 4, 11, 12, 22).

2. And what P&L accounts won't be created as cost elements and why.

For example, MM price difference is a P&L account - why should it not have a cost element.? It does flow to PCA even though there is no cost / revenue element for this P&L account.

3. Is there a document that explain T account flows between FI and PCA for a production order life-cycle?

Generous points available for each question.

[Former Member · Accepted solution]

Dear Mohan,

1. The cost element caterogy is defined as

1 Primary costs/cost-reducing revenues (expenses)

3 Accrual/deferral per surcharge (Expense)

4 Accrual/deferral per debit = actual (Expense)

11 Revenues (revenue)

12 Sales deduction (revenue)

22 External settlement (Order / Asset)

When you cannot define you expense account which is accrual in nature. Your accrual can be based on some percentage or at actuals then you can define the cost element category as 1,else if the accrual is percentage based 3 or else 4. Example your organization needs to pay bonus to their employees you don’t know the accrual of bonus amount you can create under category 1, you know you accrual basis will 20% on Salary you can create it under category 3, you know the bonus amount will be actuals of 1 months salary you can create it under cateogy 4. hope explanation for the category is not required as the cost elements by nature will default fall into any one of this category.

2. It is always better to create cost elements for all your profit and loss GL accounts.

3. The entry got posted to the PCA through the assignment of Cost center or Material master or production order. A profit center can be assigned to material master, internal order, sales order, cost center etc…

Hope i am eligible for points for each questions

Thanks

[Former Member]

Hi Mohan Das

The purpose of cost elements is more relevant to your valuated costs ....costs and revenues that are incurred during the normal course of business. In case of variances these are abnormal costs and will be not be used for valuating ( ascertaining the normal costs of production). This check will have to be done for each cost and revenue item.

If for example u are a electric company and u are selling old furniture , such sale ideally will not need a revenue element.

regards

Calappa KM