Use of Company Code, CO Area and Operating COA in Organisational structure

Organization structure in SAP is in all functional area. In financial accounting the most important element of an organization structure is company code. Other important organisational structures are controlling area and operating concern which are defined in controlling area.

A company code in SAP is a separate accounting entity of which a separate self contained set of accounts are prepared for country specific legal requirement. A four digit alphanumeric character can be defined to represent it in SAP. To this company code a general ledger is assigned which records all the transactions in it and helps in preparation of balance sheet and profit and loss account of the company code.

Each company code in sap is assigned with a local currency so that when foreign currency transactions are entered into a company code those converted back to local currency. Any one required to have a report can have it always in local currency.  

Another major organization structure element in financial accounting is business area. It’s the segment or branches of a group which is required for the purpose of segment reporting. Using business area is always optional. One can define business area and make use of this functionality. Business area is not company code specific as it’s defined at the client level.

Controlling area is defined at the controlling module and used for internal reporting. As transaction from financial accounting module flows to controlling module while defining a controlling area you need to either define one controlling are for one company code or one controlling are can be defined for n number of company codes. By assigning more than one company code to a controlling area, you enable cross-company code costing between the assigned company codes.

Assignment of more than one company code to one controlling area is possible only if those company codes use same operating chart of accounts and same fiscal year variant. if you are using different operating chart of accounts then they can not be under one controlling area so you need to create multiple controlling are.