1. Introduction to Managerial Accounting (CO)

2. Slide 2 Lecture Overview

3. Slide 3 Managerial Accounting (Defn.) Managerial Accounting – also termed Controlling – is designed to collect transactional data that provides a foundation for preparing internal reports that support decision-making within the enterprise We look at: Cost centers Profit centers Budgets

4. Slide 4 Controlling Area (Defn.) A self-contained organizational unit by which revenues and expenses are analyzed The highest (top) organizational unit in CO May include multiple company codes Thus, we can analyze costs across companies Track where revenue and costs are incurred (cost sender) Assign those costs to other objects (cost receiver)

5. Slide 5 Controlling Area (Global Bike) Global Bike Chart of Accounts Global Bike Client Company Code Chart of Accounts Global Concern Operating Concern Global Bike Inc.Global Bike Germany GmbH Controlling North America Controlling Europe Controlling Area

6. Slide 6 Controlling Area (Setup) Use the IMG to configure

7. Slide 7 Profit Center (Defn.) Responsible for revenue generation and cost control Evaluated on profit or return on investment by Region Function Product And others

8. Slide 8 Cost Center (Defn.) Responsible for cost containment Identify by location, type of activity, responsibility Copy center IT Maintenance

9. Slide 9 Internal Order (Defn.) These are temporary cost centers used to monitor a one-time or short-term events Monitoring Objects Conference Trade show Company picnic Productive orders Build a new assembly line (something that can be capitalized)

10. Slide 10 Internal Order (Types) These are the defaults but you can add more

11. Slide 11 Internal Order (Assignment) Can be assigned to a plant, business area, functional area

12. Slide 12 Internal Order (Configuring) To use CO-OPA (internal order accounting) it must be activated (transaction OKKP)

13. Slide 13 Internal Order (Details) Internal orders must be ultimately settled to another internal order or a cost center Use them so as not to bloat the cost center hierarchy

14. Slide 14 Revenue Element (Defn.) A one-to-one linkage between GL revenue accounts and CO revenue elements Data is transferred from FI to CO I’ll focus on costs in this lecture but revenue works similarly.

15. Slide 15 Cost Elements (Primary) Originated in the GL and transferred to CO Primary costs elements always map to a GL account Primary cost element numbers are the same as their GL account number We can do default assignment to a cost center

16. Slide 16 Cost Elements (Secondary) Use for allocations and settlements between cost centers Secondary cost elements do not map to FI accounts

17. Slide 17 Cost Elements (Illustration) Financial Accounting (FI) General Ledger Accounts Revenue Accounts Balance Sheet Income Statement Expense Accounts Managerial Accounting (CO) Aggregated Cost Elements Primary Cost Elements Secondary Cost Elements

18. Slide 18 Statistical Key Figures Designed to support internal cost allocations For example, the copy center might allocate costs to the departments that use the center Copy Center Activity (20 Hours) 10 Hours 6 Hours 4 Hours Executive Offices Maintenance Department IT Department

19. Slide 19 Posting Primary Cost Elements When we post a transaction, we can assign it to a cost element Primary Cost Element Debit Credit 1,500 Cost Center A Debit Credit 1,500 Supplies ExpenseCash Financial Accounting (FI) Managerial Accounting (CO)

20. Slide 20 Posting Secondary Cost Elements Secondary Cost Element CC 1 CC 2 Debit Credit 1,500 Cost Center A Debit Credit 1,500 Supplies ExpenseCash Financial Accounting (FI) Managerial Accounting (CO)

21. Slide 21 Allocating Costs Distribution is used to allocate primary cost elements We have a receiver of cost (where the cost is incurred) And a sender of costs (where the cost is allocated) Assessment is used to allocate secondary cost elements

22. Slide 22 Allocating Costs (Distribution)

23. Slide 23 Allocating Costs Assessment