Lesson 3 of 5
Cost elements and controlling
11 min
In ECC, Contoso's controllers maintained cost elements as separate master data: primary cost elements mirrored expense accounts, and secondary cost elements existed only in controlling for allocations, assessments and settlements. In SAP S/4HANA, cost elements are no longer separate objects. They are G/L accounts, and the controlling information is stored as attributes of the account.
Cost elements become accounts
Every G/L account has a G/L account type. For controlling, the relevant types are Primary Costs or Revenue and Secondary Costs. An account of either type also carries a cost element category, for example 1 for primary costs, 42 for assessment or 43 for internal activity allocation. You maintain all of it in one place: FS00 in SAP GUI or the Manage G/L Account Master Data app. The old transactions for creating cost elements are no longer used for this.
| Topic | ECC | SAP S/4HANA |
|---|---|---|
| Primary cost element | Separate CO master record mirroring an expense account | The expense account itself, type Primary Costs or Revenue |
| Secondary cost element | Exists only in CO; not in the chart of accounts | A G/L account of type Secondary Costs in the chart of accounts |
| Maintenance | Separate cost element transactions | FS00 or Manage G/L Account Master Data |
| Cost element groups | Maintained in CO | Still available for reporting and allocation cycles |
| FI-CO reconciliation | Reconciliation ledger and periodic reconciliation postings | Not needed; both views read the same journal lines |
During conversion, a migration activity creates the G/L account attributes for Contoso's existing cost elements. Secondary cost elements become new G/L accounts in the chart of accounts. Two consequences follow. Allocations now appear in the general ledger, so financial statement versions must place secondary cost accounts sensibly (they net to zero overall but can show on intermediate lines). And CO document types used for allocations must be set up for G/L posting, which the migration handles but testers should confirm.
- Primary costsSpare parts expense posts to the maintenance cost center as a journal entry
- Assessment cycleMonth-end cycle allocates maintenance costs to production cost centers
- Secondary cost accountThe assessment posts to a secondary cost G/L account with category 42
- Universal JournalSender credit and receiver debits are journal entry lines, visible to both G/L and CO reports
- ReportingCost center reports and the G/L show the same lines, so there is nothing to reconcile
Profitability: margin analysis is the direction
ECC customers used costing-based profitability analysis (value fields in a separate store) or account-based profitability analysis, or both. In SAP S/4HANA the account-based approach is called margin analysis and records profitability attributes (customer, product, sales organization and others) directly on the journal entry lines. SAP's investment goes into margin analysis; costing-based analysis remains available in on-premise and private cloud editions but is not offered in SAP S/4HANA Cloud Public Edition. Contoso has decided to use margin analysis only, which means its contribution margin reports will be built from G/L accounts rather than value fields.
A practical difference testers notice: with margin analysis the cost of goods sold from a goods issue carries profitability attributes, so the margin for an alternator sale to Great Lakes Fleet Services can be read from the journal entries of the goods issue and the billing document together. If the project also activates splitting of cost of goods sold into its cost components, those appear as separate accounts. Ask the controlling lead which options are active before writing expected results.
What would you do?
After conversion, Contoso's monthly financial statement shows a new line with a large debit on one plant and a matching credit on another. Dan asks whether the statement is wrong. What is the most likely explanation?
- Cost elements are G/L accounts with type Primary Costs or Revenue or Secondary Costs plus a cost element category.
- Maintain them in FS00 or Manage G/L Account Master Data; secondary cost accounts are part of the chart of accounts.
- Allocations now show in the G/L; financial statement versions must place secondary cost accounts.
- Margin analysis (account-based) is SAP's direction; costing-based analysis is not offered in Public Edition.
- Reports that change their data source need reconciliation, not just a smoke test.
Check your understanding · not graded
Lesson check
1. Where are cost elements maintained in SAP S/4HANA?
2. What G/L account type does an assessment account have?
3. Why is the FI-CO reconciliation ledger no longer needed?
4. What is SAP's strategic approach to profitability analysis in S/4HANA?