ch3.1
1. Types of accounting
A. Financial accounting — Records and reports financial information for external users, such as investors, creditors, and regulators. It follows standards such as GAAP or IFRS.
B. Management accounting — Provides financial and operational information to internal managers to help with planning, controlling costs, making decisions, and evaluating performance.
C. External auditing — An independent examination of an organization’s financial records and statements to determine whether they are fairly presented and follow applicable standards.
D. Tax accounting — Focuses on calculating taxable income, determining taxes owed, and complying with tax laws and regulations.
2. Cost objects and controlling terms
A. Internal order — A controlling object used to track costs for a specific temporary task, event, project, or activity, such as a company picnic or marketing campaign.
B. Cost center — An organizational unit used to collect and monitor ongoing costs, such as the IT department or human resources department.
C. Settlement profile — Configuration that defines the rules and parameters for settling an internal order’s costs to permitted receivers.
D. Statistical key figure (SKF) — A measurable quantity used to help allocate costs, such as the number of employees, square footage, or machine hours. It can be fixed or total.
3. Cost allocation methods
A. Distribution — Allocates primary costs to other controlling objects while preserving the original primary cost element.
B. Assessment — Allocates costs by combining primary and/or secondary costs and transferring them using a secondary cost element.
C. Internal activity allocation — Charges one cost center or controlling object for work performed by another, using an activity type, quantity, and price. For example, 12 hours × $100 per hour = $1,200.
D. External settlement — Settles an internal order’s costs to an external receiver, such as a general ledger account or an asset, rather than another internal controlling object.
4. Other management accounting concepts
A. Settlement — Transfers costs collected on an internal order to designated receiver(s), either internal or external, according to settlement rules.
B. Profitability analysis — Examines revenue, costs, and profit to understand the profitability of products, customers, services, or market segments.
C. Primary cost element — Represents costs originating outside the controlling system, such as supplies expense, and links to a general ledger account.
D. Secondary cost element — Represents costs transferred or allocated within management accounting, such as internal activity allocation or assessment.
E. Statistical cost information — Information used for tracking or analysis without functioning as a direct actual-cost posting. A statistical key figure is one example.
F. Activity — Work or a service performed by a cost center, measured through an activity type and used to calculate internal charges.
5. Organizational structure and master data
A. Cost center hierarchy — A structured grouping of cost centers used to organize and report costs. It can represent departments or other organizational units.
B. Controlling area — The main organizational unit for management accounting. It defines the framework for cost accounting and can include one or more company codes, depending on the organizational setup.
C. Activity type — Identifies a kind of work or service provided by a cost center, such as programming hours or machine hours. It is used with the activity quantity and price to allocate costs.
6. Examples and configuration
A. Supplies expense — A typical primary cost originating from purchasing supplies from an external supplier.
B. Programming cost element — A cost element used to track programming-related costs or charges. If it represents an internal service allocation, it would generally be a secondary cost element; its classification depends on how it is configured.
C. Number of employees — An example of a statistical key figure that can be used to allocate costs among cost centers.
D. Internal order status — Indicates the current stage of an internal order’s lifecycle, such as Created, Released, Technically complete, or Closed.
7. Settlement configuration
A. Define product selling prices — This is not the primary purpose of settlement configuration. Settlement configuration determines how costs are transferred from an internal order to its receiver(s).
B. Define settlement permissions and parameters — The correct purpose of a settlement profile and related settlement configuration. These determine which receivers are permitted and which settlement rules apply.
C. Create company codes — Company codes are defined in financial accounting organizational configuration, not through settlement profiles.
D. Record employee hours — Employee hours may be recorded as activity quantities or other time data, but recording hours is not the purpose of a settlement profile.
8. Internal order statuses
A. Created — The order has been created but is not yet released for normal execution.
B. Released — The order is authorized for processing and for relevant cost postings.
C. Technically complete — The order’s operational work is considered complete, though remaining financial processing may still be needed.
D. Closed — The order is closed to further normal processing after the required activities and financial steps have been completed.
Quick memory tips
Cost center = ongoing costs.
Internal order = specific project or event.
Distribution = keeps the original cost element.
Assessment = uses a secondary cost element to combine costs.
Internal activity allocation = charges for work performed.
Settlement = transfers order costs to receivers.
Primary = costs from outside controlling.
Secondary = internal allocations.
Statistical key figure = measurable quantity used for allocation.
Controlling area = main management accounting structure.
Settlement profile = defines settlement rules and permitted receivers.