Profit Center

Definition

A profit center is an organizational unit in accounting that reflects a management-oriented structure of the organization for the purpose of internal control.

You can analyze operating results for profit centers using either the cost-of-sales or the period accounting approach.

By calculating the fixed capital as well, you can use your profit centers as investment centers.

Use

Profit Center Accounting at the profit center level is based on costs and revenues. These are assigned statistically by multiple parallel updating to all logistical activities and other allocations of relevance for a profit center.

The exchange of goods and services between profit centers can be valuated using the same valuation approach as in financial accounting or another approach (see Multiple Valuation Approaches/Transfer Prices ).

Structure

The master data of a profit center includes the name of the profit center, the controlling area it is assigned to, and the profit center’s period of validity, as well as information about the person responsible for the profit center, the profit center’s assignment to a node of the standard hierarchy, and data required for communication (address, telephone number and so on).

Every profit center is assigned to the controlling area organizational unit. This assignment is necessary because Profit Center Accounting displays values in G/L accounts.

The system transfers all the data to Profit Center Accounting together with the G/L account to which the data was originally posted. You can only aggregate data that shares the following:

Same chart of accounts
Same fiscal year variant
Same currency

Time-Based Master Data

Like cost centers, profit centers are valid for a specific time period. This has the following advantages:

No complicated activities are necessary when a new fiscal year begins.
You can enter future changes to the master data in advance.

Profit centers are time‑dependent in two ways:

First, you can enter a period during which actual or plan data can be posted to the profit center.
Second, you can define time-based fields when you customize Profit Center Accounting.

Time-based fields let you change information in the profit center master record, such as the person responsible for the profit center, at a specific point in time without having to create a new profit center and without losing any information about the previous person responsible.

Integration

Enterprise Organization

If you are using the enterprise organization, both profit centers and cost centers form part of it. For more information, see Enterprise Organization .

Note Note

You can only use the enterprise organization to portray relatively small hierarchies. Trying to portray a larger hierarchy in the enterprise organization can lead to performance issues.

End of the note.

The Standard Hierarchy

To ensure that your data in Profit center Accounting is consistent with that in other areas, you must assign each profit center to the Standard Hierarchy .

The standard hierarchy is used in the information system, allocations, and various planning functions. You can also assign your profit centers to alternative hierarchical structures, called Profit Center Groups .

Copying Cost Centers

If the profit centers in your organization are closely linked to your cost centers, you can simply copy your cost center master data to create your profit centers. For more information on this function, see the Implementation Guide (IMG) for Profit Center Accounting, under Master Data .