Primary Cost element and Secondary Cost Element

Every Profit and Loss GL account that needs to be controlled has to be defined as a cost element in SAP. Just as in FI General Ledger Accounts exist, in Controlling we have Cost element.

Each FI General Ledger Account that is a Profit and Loss Account is also created as a Cost element in SAP.

Primary Cost Elements are those which are created from FI general Ledger Accounts and impact the financial accounts eg. Travelling expenses, consumption account infact, any Profit and Loss GL account.

Secondary Cost Elements are those which are created only in controlling and does not affect the financials of the company. It is used for internal reporting only. The postings to these accounts do not affect the Profit or Loss of the company.

The following categories exist for secondary cost elements:

  1. Internal Settlement: Cost elements of this category is used to settle order costs to objects in controlling such as cost centers, pa segments etc.
  2. Order/Results Analysis: Used to calculate WIP on the order/project
  3. Overhead: Used to calculate indirect costs from cost centers to orders
  4. Assessment: Used to calculate costs during assessment
  5. Internal Activity Allocation: Used to allocate costs during internal activity allocation such as Machine Labour etc