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Difference between Business area and profit center

Former Member

Hello Gurus,

I want to know the diff between business area and profit center in detail and if we are using business area means we cannot use the profitcenter at the same time or we can use plz clarify my doubt

thanks in advance

regards

sravya

Accepted Solutions (1)

Accepted Solutions (1)

Former Member

Hi Sravya

Business area relates to FI and profit centre relates to Controlling. In the advent of profit centre accounting the concept of business area is losing its relevence. However it may, profit centre accounting is crucial in taking a management decision. Business area accounting is mainly aimed to have a reporting geographically(also for external reporting).

Regards

Appaji

Answers (4)

Answers (4)

Former Member

you cant compare a BA and a PC.

PC is a structured piece of master data.

A Business Area is a defined area of a business that can go over Company Codes and floats.

Former Member
0 Kudos

Hello Sravya,

A profit center is a management‑oriented organizational unit used for internal controlling purposes. Dividing your company up into profit centers allows you to analyze areas of responsibility and to delegate responsibility to decentralized units, thus treating them as “companies within the company”.

The essential difference between a profit center and a business area is that profit centers are used for internal control, while business areas are more geared toward an external viewpoint.The profit center differs from a cost center in that cost centers merely represent the units in which capacity costs arise, whereas the person in charge of the profit center is responsible for its balance of costs and revenues.

Hope this helps. Please assign points.

Rgds

Manish

Former Member
0 Kudos

Hi

Business area will have many profit centers. For example Vehicle is a business area in a company. Vehicle can be cars and Bikes etc. Here Vehicle is business area and Cars and Bike are profit centers. In broad Vehicle is a profit center. But as it has sub areas those are profit centers. So profit centers cannot be replaced with business area and vice versa. We can replace business area by Profit centre, only condition is that it should be in same controlling area. The business area is more like a business unit of a company. You can have multiple profit centers within a business area.

Main distinguish factor is that distribution and assessment in possible in profit center but not in business area.

One more distinction is that Business area need not be attached to any organisation structure. But profit centres can be created only under the controlling area. Business area can be across controlling area.

Business area concept is used for making stragic decisions by the management whereas the primary purpose of profit centre accounting is responsibility accounting.

http://help.sap.com/saphelp_erp2005/helpdata/en/ff/277203deea11d3b5b4006094b9b0a5/frameset.htm

Former Member
0 Kudos

<u><b>Business area</b></u>:When company has different area of operation like different product lines or different different region and they want financial statements for each of there area of operation along with company code wise financial statements then we go for Business area.

<u><b>Profit center:</b></u>Profit center accounting we use to evaluate profit or loss for a particular

area.The main aim of Profit Center Accounting is to determine profit for internal areas of responsibility

The essential difference between a profit center and a business area is that profit centers are used for internal control, while business areas are more geared toward an external viewpoint.

Business area and profit center can be used together because two of them are serving different purposes.

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