Welcome to the tutorial about SAP cost center master data. This tutorial is part of our free SAP CO training. Here, you will learn introduction about SAP cost center master data, configurations that influence it, and how to create a new cost center in SAP.

SAP Controlling (CO) offers information to decision makers for planning, measuring and monitoring enterprise’s operations and performance. It represents the internal accounting view of an organization. The data which is relevant to revenue and cost are created from various sources such as Financial Accounting (FI), Materials Management (MM), etc. The cost and revenue flows will update FI and simultaneously create equivalent postings in CO. The system assigns the revenues and expenses to different CO account assignment objects like profitably segments, cost centers or orders. The relevant accounts in financial accounting are managed in Controlling as cost accounts or revenue accounts.

SAP Cost Center Master Data

SAP Cost Center accounting monitors costs and assigns them to the location at which they occurred in line with their source(s). These costs can include salaries, rental cost or any other cost that can be assigned to an existing cost center.

In order for SAP Cost Center Master data to be created, the following two configurations have to be maintained.

1. SAP Cost Center Standard Hierarchy

The standard hierarchy is a structure to which all cost centers within a controlling area must be assigned. A cost center can only be assigned to one node on the standard hierarchy. However, different cost center groups can be created for additional reporting requirements. The nodes in the standard cost center hierarchy are primarily intended for reporting requirements and can be changed. Also, additional nodes can be added as the business requirements change. SAP Cost Center assignment to a hierarchy node can be changed as per business requirement during its lifetime. A node can only be deleted if there is no cost center assigned to this node.

SAP Cost Center(s) will be created under a node in the Cost Center Hierarchy. This node can be a node directly under the Standard Hierarchy or a sub node under that. There can be multiple sub nodes to reflect the organization structure in the Cost Center Standard Hierarchy. Irrespective of the node under which the cost center is created, it will be linked to the Profit Center to which it belongs to.

2. Cost Center Category

The main element of configuration is the cost center category. The cost center category is an indicator in the master record that specifies a category for additional reporting options and default master data settings applied at the moment of a cost center creation.

Cost Center Actual Posting

All postings relevant to Controlling will primarily flow from Financials, Logistics and HR modules. In addition, the allocation and distribution of costs will happen within the Controlling module. The CO configuration settings will ensure that FI and CO are always synchronized and no manual reconciliation processes are required.

Every Profit & Loss G/L Account, which is also created as a Cost Element, will make it mandatory to enter a cost object during document postings. However, many postings like payroll or depreciation will inherit the cost object from the relevant master data.

How to Create Cost Center Master Data?

Let’s see how to create cost center master data in SAP. First of all, you need to navigate to the following path in SAP Easy Access Menu:

Accounting – Controlling – Cost Center Accounting – Master Data – Cost Center – Individual Processing – Create

It is also possible to launch the same transaction by entering the transaction code KS01 in the transaction bar.

On the initial screen of KS01 you should provide the following details:

• Controlling area under which the cost center has to be created.
• Cost center code as per the naming convention followed at your SAP project. If there is no specific naming convention, then any unused code can be entered.
• Validity period of the cost center with from and to fields (start date and end date).

Alternatively, you can enter all the above details with a reference to any existing cost center from another or the same controlling area. The SAP system will then copy all details of that cost center to save time.

After entering all these details, click Enter on the keyboard and the system will show you the next screen. In the next screen that is called “Create Cost center: Basic Screen”, you should enter the following details:

Name: It is used for online displays and evaluations.

Description: It is a description of the name of the cost center which is also used for displays and evaluations.

User Responsible: Enter the person responsible for the cost center.

Cost Center Category: Enter the cost center category number under which the cost center will sit. This is also used under evaluations and displays.

Hierarchy area: The Basic structure or Hierarchy to which the cost will be assigned.

Currency: The company code currency or any other currency in which this cost center has to be maintained.

The next tab “Control” has additional parameters of a cost center. You should configure the necessary options there as required by the business.

Finally, you need to save SAP cost center master data by pressing Save button on the top of the screen  or CTRL-S on the keyboard. As a result, SAP cost center master data has been successfully created.