Difference between business area and profit center

Difference between business area and profit center[@more@]

Retrospect/history:

The business area is used in addition to the company code as a further unit for external reporting that has to be done by the company. The area of responsibility of business areas generally stretches over several company codes (lines of business, divisions). For the business area financial statement, all Controlling objects (cost center, orders, sales orders and so on) and Logistics objects (material, fixed assets) are assigned to the corresponding business areas. Then, Financial Accounting evaluations (financial statement) are additionally created for the different business areas. In addition to the reporting aspect, the business area has controlling and selection functions in accounts receivable and accounts payable accounting.
Profit Center Accounting was initially only implemented for displaying the results of internal areas of responsibility. For this purpose, all controlling objects relevant for revenues and expenses (cost center, orders, projects, sales orders and so on) were mapped on profit centers and updated with the corresponding data affecting the result. For displaying profitability key figures (return on investment), current asset and fixed asset balance sheet items as well as short-term payables were distributed to profit centers later. Consequently the profit center became more and more similar to the business area with respect to the assignment of financial statement data. The display of a profit enter hierarchy, statistical key figures, profit center assessments/distributions, as well as the clearing for internal transfer prices represent additional developments in contrast to the business area. There is, however, no balance to zero per profit enter.

Current situation:

The differentiation into an externally oriented classification according to business areas and a classification for internal controlling purposes according to profit centers, became less important in the course of the convergence of external and internal accounting. It becomes more and more difficult for the customer to choose between the two entities.

Our intentions:

Our aim is to inform our customers regarding the further development.

To meet the changing requirements, we will focus the further functional developments in Financial Accounting on the profit center entity. With the New General Ledger in release mySAP ERP 2004 it is possible, to create financial statements on profit centers. Refer to Note 756146 for more detailed information.
The business area will be retained in the present form. Data and functions will be available in future.

The controlling and selection functions in accounts receivable and accounts payable accounting will be represented by own entities.

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