How to create Cost Center in SAP – KS01

Cost Center in SAP is an organizational unit within a controlling area which represents a defined location of cost occurrence. It is the lowest level in the Organizational Structure for cost collections. Each Cost Center in SAP attached to a Profit center. Cost center in sap can be defined based on:

  • Functional requirements
  • Allocation criteria
  • Physical location
  • Responsibility area

Standard Hierarchy for Cost Center in SAPwill be defined, to which all the cost centers would be attached, which will give the outlay of the Organization structure.

Such standard hierarchy of cost centers in sap will represent the organizational structure which the business will follow for allocation of expenses within the Controlling module.

Cost Center groups consist of cost centers of similar characteristics grouped together for easy reporting requirements. These groups are like Maintenance, Services, Quality & Engineering, Materials, Finance & Accounts, Production, Projects, MS & Admin etc., will be created based on reporting requirements.

Cost center groups in SAP are defined in addition to the standard hierarchy and can be used in validation and substitution rules. By using these groups we can also allocate expenses within the Controlling module in SAP.

Allocation of Costs to Production Cost Center in SAP

From the service cost centers, expenses will be allocated to the other cost centers. This would be done through multiple ways by using assessment / distribution/ Periodic Reposting.

For this purpose cycles and segments for allocation of expenses will be configured. Allocation will either be based on statistical key figures or on fixed percentage basis. SAP will calculate activity prices i.e. the price per unit of the activity provided / job done by the production cost center.

After all the above steps, only balances that remain would be in the overhead Cost Center like administrative etc. and in the production Cost Center.

How to Create, change and Display Cost Center in SAP

Cost Center can be created, changed and displayed by using sap path and transaction codes. Here are the path and transaction codes to create, change and display.

SAP Path: SPRO > Controlling > CC Accounting > Master Data > Cost Centers > Create Cost Center

Transaction Code: KS01

Change/Display/Delete Cost Center in SAP

Path : SAP Use Menu > Accounting > Controlling > Cost Center Accounting > MasterData > Cost Center > Individual Processing > Change

You can use the above path for deleting and displaying a Cost Center master data.

  • Transaction Code for Cost Center change/display/delete/display changes: KS02/KS03/KS04/KS05

All expenses posted in financial reporting are transferred to Controlling module with the help of primary elements. These primary elements must use a Cost Centers or any other object defined in controlling module to have the posting in controlling module.

Without this assignment you can not get data in to controlling module. To make it a mandatory entry for entering cost centers while posting, transaction in financial accounting you need to assign a field status group to the gl master where the Cost Center filed should be a required entry. You can use sap standard filed status group 004 for this.

Note: SAP and SAP logo is a registered trademark of SAP AG in Germany and in several other countries. We are not affiliated or related to any division or subsidiary of SAP AG.

Editorial Staff at Yourfinancebook is a team of finance professionals. The team has more than a decade experience in taxation and personal finance.