Purpose

The profit and loss statement of an organization can be created according to two different procedures:

Cost of sales accounting compares the sales revenue for a given accounting period with the manufacturing costs of the deducted activity.The expenses are allocated to the commercial functional areas (production, sales and distribution, administration, and so on). Expenses and revenues that cannot be assigned to the functional areas are reported in further profit and loss items, sorted according to expense and revenue type.

With this type of grouping, cost of sales accounting identifies where costs originate in a company. It identifies the economic reason for a particular expense.

Implementation Considerations

Before you can run cost of sales accounting, you have to make various settings in Customizing. For more information, see Activating Cost of Sales Accounting .

You make these settings in Customizing for Financial Accounting, under  Financial Accounting Global Settings Company Code Cost of Sales Accounting .