Cost Element Accounting is the part of accounting where you enter and organize costs incurred during a settlement period. It is thus not an accounting system as such, but rather a detailed recording of data that forms the basis for cost accounting.

In an integrated accounting system such as the SAP R/3 System, you do not need to enter cost data in a special way. This is because each business transaction relevant to cost accounting provides the (CO) component with detailed information for the cost element, and for the account assignment object itself. Each consumption transaction in Material Management (MM), each billing in Sales and Distribution (SD) (= revenue), and each external transaction for invoice verification flows directly through the G/L Account (= cost element) to the corresponding account assignment object.

You can restrict the entry of cost data to a part of the Outlay Costs and Additional Costs. While, for example, you can transfer depreciation costs from Asset Accounting for the depreciation of fixed assets, you must use accrual calculation in cost accounting for management income.

The cost accounting component in the SAP R/3 System also has the task of identifying the costs incurred in the subareas of an organization, and the cost flows that took place. The R/3 System provides a complete display of the costs for all types of account assignment objects (such as cost centers, orders, projects, and so on).

For cross-company-code or cross-business-area cost accounting, the cost flow in Controlling may require reconciliation between internal and external accounting. The necessary reconciliation is also one of the tasks of Cost and Revenue Element Accounting.