What is functional Area in SAP

What is functional Area in SAPFunctional area in SAP used to organize business for cost of sales accounting. You can define it based on the functions that a company or an organization carries.

Examples of Functional area in SAP;

  • Production
  • Sales and distribution
  • Administration
  • Human resource

How to create functional area in SAP

You can create it in sap by using transaction code OKBD or path;

SPRO > Enterprise structure > Maintain Structure > Definition > Financial Accounting > Maintain Functional Area 

Enter a name and description to the functional area and save it.

If you want it to be used then substitution need to be maintained. By using substitution system will fill the value of desired functional area in sap or else you can enter it in following objects;

  • General ledger account
  • Cost center
  • Internal order
  • Sales order
  • Production order
  • WBS element

System will derive functional area from these objects after you save the document.

If you enter a transaction with a cost center assigned to it and such cost center master is assigned to a functional area. Then system derive and assign it to the document.

If any substitution rule has been defined to enter a functional area then that will be taken in priority and such area will be entered to the document.

If you missed it in one transaction then it will be very difficult to reconcile the balance sheet and profit and loss account with the functional area balance sheet and profit and loss account. So its always advised to plan it before you maintain it in SAP.

How to create substitution rule for functional area

You can create substitution by using following transaction code GGB1 or by using following path;

SPRO > Financial Accounting > Special Purpose Ledger > Tools > Maintain validation/substitution/rules > Maintain Substitution

To create a substitution select Substitution > Create

How to activate substitution rule

To activate use transaction code OBBZ or path;

SPRO > Financial Accounting > Financial Accounting Global Settings > Company code > Prepare Cost of sales Accounting

In the field activate item you enter 1 to activate it.

In SAP it is substituted by cost center accounting. Now a day’s businesses are using this concept because they are getting better result through cost center accounting. Functional area is not assigned to a company code and we do not have any standard methodology to reconcile these financial statements. At the end of the year it’s easy to reconcile cost center accounting which is difficult in functional area management. For better result its always suggested to use cost center accounting. You can also use functional area in addition to cost center accounting.