cost center & profit center

[Former Member]

Dear all,

Anyone explain about profit center and cost center...

whats the difference?

regards

Sumi

[former_member192897]

Profit Center: A unit of an organization that generates both revenue and expenses. Its goal is to have revenue exceed expenses.

Cost Center: A unit of an organization that generates expenses and has no responsibility for generating revenue. Its goal is to adhere to expense budgets.

Profit Center Accounting provides visibility of an organizationu2019s profit and losses by profit center. The methods which can be utilized for EC-PCA (Profit Center Accounting) are period accounting or by the cost-of-sales approach.

Profit Centers can be set-up to identify product lines, divisions, geographical regions, offices, production sites or by functions. Profit Centers are used for Internal Control purposes enabling management the ability to review areas of responsibility within their organization.

The difference between a Cost Center and a Profit Center is that the Cost Center represents individual costs incurred during a given period and Profit Centers contain the balances of costs and revenues.

Regards,

Ashok

[snipersap]

Thanks Ashok and Avila for the good explainations

[Former Member]

The main aim of Profit center accounting is to determine profit for internal areas of responsibility. Further by assigning balance sheet items (Fixed assets, Receivables and Payables, Stocks) to profit centers, we can also analyze our companyu2019s fixed asset by profit center. Profit centers can be set

up according to product lines, geographical factors (region, offices or production sites) or function (production, sales). We can divide our business into profit centers by assigning the profit centers to the various master data (materials, cost centers, orders, projects, Sales orders, assets, cost objects

and profitability segments). Every profit center is assigned to the organizational unit controlling area.

Cost Center provides information on the costs incurred by your business. Within SAP, you have the ability to assign Cost Centers to departments and /or Managers responsible for certain areas of the business as well as functional areas within your organization. Cost Centers can be created for such functional areas as Marketing, Purchasing, Human Resources, Finance, Facilities, Information Systems, Administrative Support, Legal, Shipping/Receiving, or even Quality.

Regards

[BijayKumarBarik]

Hi,

Profit Centre: it is that department responsible for cost as well as revenue of department .The department is called profit centre like "Autonomous Business Units".

Cost Centre: it is that department responsible for cost spendings only like production department.

for more check the linkS

http://www.sap-basis-abap.com/fico/difference-between-profit-centre-and-profitability-analysis.htm

http://www.geocities.com/royston76/method/m34.htm

Regards,

Biju K