How to do Cost Element Accounting in SAP FICO
Cost Element Accounting is the area of cost accounting where you track and structure the costs incurred during a settlement period. In this case, the cost element represents the link between the account in Financial Accounting (FI) and the cost element in Controlling (CO). Further cost elements can be created specifically for allocating costs from Cost Center Accounting to Profitability Analysis.
In an integrated accounting system such as the SAP system, you do not need to enter cost data separately. This is because each business transaction that involves costs updates the CO component with detailed information on the cost element and on the account assignment object itself. Each consumption transaction in Material Management (MM), each billing in Sales and Distribution (SD) (= revenue), and each external transaction for invoice verification flows directly through the G/L Account (= cost element) to the corresponding account assignment object.
Cost Element Accounting is often used to provide a high-level overview of the costs within an organization by object type or object class.
Sometimes the postings in FI do not match the timing required in CO. In CO, you can choose to create rules for accruals to spread costs posted in a single period to multiple periods. You can also choose to take a different approach. Thus you can have multiple different approaches to the depreciation of fixed assets, but only transfer some of these postings to CO.
If you allow cross-company postings in CO, for example, by defining assessment cycles that cross several company codes, then you need to be aware that real-time integration is needed to bring these postings into FI.