Order settlement to G/L instead of Cost Centre.

[former_member221085]

Dear All,

My client has following scenario:

1. Cost centers are created as sections of the plant.

2. G/Ls are created with respect to activity (i.e normal consumption, project consumption, turnaround consumption).

In general maintenance order is settled to cost center that is copied from equipment master to order settlement rule. But, in above scenario cost should be settled to combination of "Cost Center + G/L" i.e. if mechanical section creates an order for any of the above said activities, the order should be settled to mechanical cost center and respective G/L account.

"One way around to this issue can be accomplished by settling the order directly to G/L defined in combination with section and activity."

Is this a correct practice if we settle maintenance order directly to G/L and do not use cost centers?

Your expert opinions and any other solution if you can suggest in this regard will be very helpful.

Thanks.

[Former Member]

Hi,

Maintenance Orders are generally settled to cost centres as maintenance activities are nothing but Expenses. Please note that Cost Centers are meant to capture costs through GL accounts which are to be created as a Primary Cost elements in CO and the costs are passed to the cost center through account assignments.

The settlement will require an assignment to a CO object which may be a cost centre,order,WBS etc. If you are trying to simply assign the settlement receiver as "GL account" in Order, system will ask you for asignment to a CO obeject. Hence it is imperative to use cost centres.

For your scenario, you need to specify the range of cost elements to which settlement is allowed in the "Allocation structure" configuration. Tick on settlement by cost elements.Allocation structure is linked to your settlement profile.

When settlement process runs, your order cost will flow to the respective cost centre(from settlement rule) and the corresponding cost element will be affected. The details of debit and credit can be checked through the CO document which is generated.

Hope this throws some light on your query.

Regards,

S.Basu

[former_member385375]

Dear process export,

Infact both G/L A/c & cost center are required for an integrated business process. Cost center is nothing but a cost collector object which is part of controlling which is used in the process of costing an activitysuch as production/maintenance then later analysed for profitability analysis. You might have noticed that when you post a goods movement an accounting document along with the material document gets generated. It also generates a controlling document. Your material document contains both the debit & credit G/L A/C normally your inventory G/L & your repair & maintenance G/L. THe controlling documents contains the cost element that gets hot during the transaction. Cost elements are nothing but carrier of cost through which different costs gets documented. On settlement the cost gets drawn out from the order & collected at cost center then its adds up in the production cost & product cost gets calculated. So cost center accounting is must & correct practice.

Regards

S P Behera

[former_member661330]

Hi,

To settle cost from work order to G/L account is used on capital work orders only, if your work orders is only expenses should be settle to a cost center or expenses WBS; all expenses as materials, labors, services are identified using primary and secondary Cost elements

Regards

Carlos

[Former Member]

Hi,

The correct and best practice is to settle the orders in cost centres only. In fact every year maintenance budget is created and allotted a particular monetary slot to a particular maintenance departments/ cost centres. so, everytime an activity is performed it gives a clear costing picture.

Regards,

Lucky

[Former Member]

Hi,

W.r.t your thread and question:

"Is this a correct practice if we settle maintenance order directly to G/L and do not use cost centers?"

Dont you need and costs to be maintained and calculated for the process.

Even though you may settle the costs but there are hidden costs to be considered for business and there fore accounting.

I think Its a good practice to Maintain "Cost centre", Infact it is a must.

Reagrds

DSR