Cost Accounting

In addition to their regular bookkeeping, many businesses perform expense and revenue analyses that measure the profitability of each of their business activities or departments. The cost accounting function in SAP Business One enables you to define sets of cost-centers and distribution rules. Generating respective reports provides important cost-related information. SAP Business One provides two cost accounting methods: distribution rules and projects. In this blog we will be discussing about cost-centers, distribution rules & dimensions.

 

1.      Cost-Center: A cost-center is a company unit or division that performs a specific business function, such as manufacturing specific products or providing a specific service. The cost-center you define here represents the respective division or department and is used to consolidate the expenses and revenues resulting from the ongoing activity of the specific organizational unit.

2.      Distribution Rules: A distribution rule is a cost accounting method used to allocate direct and indirect expenses and revenues to one or more cost centers. It contains information regarding the portion or the fixed amounts of the expenses or revenues to be allocated to each cost center. Example: (Say you want to distribute your indirect expense incurred by rent; you can specify the portion of the total rented space that a specific cost center uses. If the sales department uses 700 SqFt and HR department uses 200 SqFt, you can distribute the expenses incurred by rent and professional cleaning services proportionately between the two departments using distribution rules.)

3.      Dimensions: Multi-Dimensions are used in an organization when you require multiple views of an expense and revenue analysis. Example: (The CEO of your company discussing the products OEC Computers sell, the CEO tells you that they want to analyse revenues and expenses by the two lines of business they run:  hardware and applications. At the same time, the accountant claims that a better analytic view will be according to departments. That is sales, support, and development. Both views can be incorporated using two different dimensions, Departments and Line of Business. Multi-Dimensions enable up to five different views to be generated on the same data.)