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Profit center and Cost center Basics

Former Member
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Can any one of you give me what is profit center(what all make a profit center) and what is cost center(what all element make cost elements)?

Any links with information will also help


Accepted Solutions (1)

Accepted Solutions (1)

Active Contributor
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Answers (2)

Answers (2)

Former Member
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Former Member
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Profit center:

An organizational unit in Accounting that reflects a management-oriented structure of the organization for the purpose of internal control. Normally revenue are accured in profit center. eg., product line, location etc.,

Cost center:

An organizational unit within a controlling area that

represents a defined location of cost incurrence.

The definition can be based on:

o Functional requirements

o Allocation criteria

o Physical location

o Responsibility for costs

You assign a cost center to a profit center so that you can see the profitability.

You can have all the cost elements(Profit & Loss - Expenses) related used in cost center.

Only revenue related elements are used in profit center.