1. Internal Accounting Text Chapter 10 and R/3 Profit & Cost Reporting

2. Internal Accounting Also called “Financial Accounting” Oriented towards business planning and controlling and reducing costs –cost accounting- direct and indirect –conventional cost center accounting vs. process-oriented view

3. R/3 Internal Accounting Scenarios Cost Object Controlling Profitability Analysis Profit Center Accounting Overhead Cost Management

4. Primary Business Objects Involved Cost elements Internal orders Cost objects Costing estimates Profitability segments

5. Cost Object Controlling Costs for manufacturing an object or service are collected for a cost object –planned and actual costs are calculated Applicable to repetitive manufacturing, process manufacturing and design-to-order –begins with preliminary costing –goods in production use simultaneous costing to compare planned vs. actual costs –when finished, period-ending closing begins

6. Cost Object Controlling ^^ Production order is to be created Creating/ processing prod. order Release of production order Production order is created Production order is partially released Prod. Order preliminary costing Prod. Order is to be carried out Prelim. Costing of prod. Orders triggered

7. Cost Object Controlling (part 2) ^^ Execution of production order Goods receipt process. From production Production order is completed Diff. Posted to price diff account Material is posted in consumption Goods receipt to be posted Actual data for period completed Production order simultaneous costing

8. Period End Closing and Final Costing Process costing calculation Process costing calculation is completed Overhead calculation Production order debited with indirect costs Determine WIP in workplace/ lot processing

9. Period End Closing and Final Costing (Pt 2) ^ Variance to be calculated Remaining cost to price difference acct Production order to be settled against material Settlement of production order Variance calculation Production var. settled to profit analysis Profitability Analysis

10. Profitability Analysis Identifies product/market margins Analyzes structure of profit-related criteria from specific orders –these profitability segments include: Customer Product Activity Organization

11. Profitability Analysis and Planning PA output is used to support different types of planning –automatic planning based on a calculation using previous year or other forecasting projection –bottom-up planning using aggregation of individual planning levels –top-down planning from comprehensive plan –time-based distribution working in seasonality, production-dependent time factors

12. Profit Center Accounting A profit center is a subdivision of a company that serves the purpose of internal control. –Usually based on products, regional markets, or functions Uses data from: –Financial accounting - costs and revenue data –SD - sales deductions, reserves, etc. –MM - costs of goods –AM - sale of capital goods –Controlling - cost data

13. Overhead Cost Management Plans, allocates, controls, and monitors indirect costs (not associated directly with cost objects) To define standards, overhead costs must be associated with one of the following –cost/revenue elements –cost centers –internal activities –ABC system or projects