Co interview questions and asnwers.


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Co interview questions and asnwers.

  1. 1. Explain Controlling (CO) in SAP.SAP calls managerial accounting as Controlling and the module is commonly known as CO.The CO module is, thus, primarily oriented towards managing and reporting cost/revenue and ismainly used in Internal decision making.As in with any other module, this module also has (a) configuration setup and (b) applicationfunctionality.The controlling module focuses on the internal users, and helps the management by providingreports on cost centers, profit centers, contribution margins & profitability etcWhat are the important Organizational Elements of CO?The important organizational structure of controlling includes:Operating Concern, Controlling Area and Company Code• Operating Concern (the top most reporting level for profitability analysis and sales &marketing controlling)• Controlling Area (central organization in controlling, structuring the internal accountingoperations)• Cost Centers (lower most organizational units where costs are incurred and transferred)What is a Controlling Area? How it is related to Company Code?A Controlling Area is the central organizational structure in controlling {CO), and is used in costaccounting. The controlling area, as in the case of Company Code, is a self contained costaccounting entity for internal reporting purposes. The controlling area is assigned to one or moreCompany Codes, so as to ensure that the necessary transactions, posted in FI, are transferred tocontrolling for cost accounting processing.Figure: Controlling Area Details
  2. 2. • One controlling area can be assigned one or more Company Codes• One chart of accounts can be assigned to one or more controlling areas• One or more controlling areas can be assigned to an operating concern• One Client can have one or more controlling areasWhat are all the Components of Controlling?• Cost Element Accounting• Cost Controlling• Cost Center Accounting• Internal Orders• Activity-Based Costing• Product Cost Controlling• Profitability Analysis• Profit Center Accounting.What is Activity Based Costing?Activity Based Costing, popularly called as ABC, helps you to view the overhead costs from thepoint of business processes. The result is, you will be able to optimize costs for the entirebusiness process.
  3. 3. As a single business process will cut across several cost centers, ABC will help you to have inenhanced view of the costs incurred.What is Product Cost Controlling ?Product Cost Controlling (CO-PC) deals with estimating of what will cost to produce a productof service.CO-PC is divided into two major areas: i. Cost of materials ii. Cost of processingWith CO-PC, you will be able to calculate: a. Cost of goods manufactured (COGM) b. Cost of goods sold (COGS)CO-PC is tightly integrated with Production Planning (PP) and Materials Management (MM),Besides FI.The functionality helps to: • Calculate Standard Costs of manufactured goods • Calculate the Work-in-Progress (WIP) • Calculate the Variances, at period-end • Settlement of product costsNote that CO-PC deals only with the production costs.What is Profitability Analysis ?Profitability Analysis (CO-PA) helps you to determine how profitable (denoted by thecontribution margin) your market segments are. The analysis is on the external side of themarket. You will be able to define which segments, like customer, product, geography, salesOrganization etc., of the market which are required for analyzing the operating results /profits.With multi-dimensional drill-down capability, you have all the flexibility you require for thereporting.What is Cost Object in SAP?
  4. 4. Cost object is nothing but a cost or revenue collector in SAP.Every P&L posting must be assigned to a Cost Object. Examples of Cost Object includes CostCenter, Internal Order, WBS element, Sales Order, Production order. Cost Object is the keyconcept in SAP Controlling.Differentiate Real and Statistical Postings in CO.The CO account assignment objects decide the type of postings allowed. This can be real orstatistical posting.The Real Postings, allow you to further allocate / settle those costs to any other cost object in PO,either as senders or as receivers.The objects which are allowed to have real postings include:• Cost Centers• Internal Orders (Real)• Projects (Real)• Networks• Profitability Segments• PP - Production Orders (make-to-order)The Statistical Posting, on the other hand, are only for information purposes. You will not beable to further allocate / settle these statistical costs to other cost objects.The example of such objects includes:• Statistical (Internal ) Orders• Statistical Projects• Profit CentersHow do you define Number Ranges in CO?You will be required to define, for each of the controlling area, Number Ranges for alltransactions that will generate documents in CO. Once done for a controlling area, you may copyfrom one controlling area to other controlling areas when you have more than one such area.To avoid too many documents, SAP recommends grouping of multiple but similar transactions,and then assigning number ranges to this group. Further, you may create different number rangesfor plan and actual data. As in FI, the number ranges can be internal or external. The documentnumber ranges in CO are independent of fiscal years.
  5. 5. What is a Cost Element?The Cost Elements represent the origin of costs.There are two types of cost elements:• Primary Cost Elements• Secondary Cost ElementsWhat is a Primary Cost Element?The Primary Cost Elements represent the consumption of production factors like raw materials,Human resources, utilities etc. The primary cost elements have their corresponding GL accountsin FI. All the expense / revenue accounts in FI correspond to the primary cost elements in CO.Before you can create the primary cost elements in CO, you first need to create them in FI as GLaccounts.Note that SAP treats revenue elements also as primary cost elements in CO processing. The onlydifference is that all the revenue elements are identified with a negative sign while posting inCO. The revenue elements correspond to the revenue accounts in FI, and they fall under theCategory 01 / 11 of cost element category.What is a Secondary Cost Element? The Secondary Cost Elements represent the consumption of production factors providedinternally by the enterprise itself, and are present only in the CO. They are actually like costcarriers, and are used in allocations and settlements in CO. While creating these elements, youneed to mention the cost element category which can be any of the following:• Category 21, used in internal settlements• Category 42, used in assessments• Category 43, used in internal activity allocationWhat is a Cost Element Category?All the cost elements need to be assigned to a Cost Element Category, to determine thetransactions for which you can use the cost elements.Example:• Category 01, known as the general primary cost elements, is used in standard primarypostings from FI or MM into CO.• Category 22 is used to settle order / project costs, or cost object costs to objects outside of CO(like assets, materials, GL accounts etc)
  6. 6. How to, automatically, create Cost Elements?You will be able to create cost elements, automatically by specifying (i) the cost element, (ii)the cost element interval and (iii) cost element category for the cost elements. All these areachieved making default settings. The creation of cost elements is done in the background.The primary cost elements can be created only when you have the corresponding GL accounts inthe chart of accounts of the Company Code. Even though the GL account names are used as thenames of the primary cost elements thus created by the system, you have the option of changingthese names in CO. All the secondary cost elements are created in CO; the naming of these costelements comes from the cost element category.Define Cost Centre Accounting .Cost Centre Accounting (CO-OM-CCA) helps you to track where costs are incurred in yourenterprise. All the costs, like salary and wages, rent, water charges etc., incurred are eitherassigned or posted to a cost centre.Explain posting of costs to Cost Centers’.When you create accounting transitions in Fl / FI-AA / MM, you typically post to one or moreGL accounts. While doing so, provided you have already configured in such a way, you alsorequire the user to input the cost centre for that transactions, so that when the transaction isposted the values costs flow not only to the GL but also to CO to the appropriate cost centre.The system will be creating two posting documents: one for FI and another for CO.Besides, you will also be able to post non-financial information like direct labor hours from HRor SAP modules to cost centers in CO.What is an Activity Type?Activity Type helps you do define the service / action (example: human labor, machinelabor, repair hours etc) performed or provided by a cost centre. It forms the basis for allocatingcosts to if other cost centers or internal orders etc. You may assign an activity type to anoperation so that they are reflected in PP. a CO document is created with the costs of theoperation allocated from m the cost center that produced the operation to a production order,when the operation is completed in PP.You may group activity types into activity type groups for easy maintenance.
  7. 7. You need to arrive at the activity price which needs to be attached to that particular activitytype for planning or recording the actual. The activity price is calculated by dividing the totalcosts by the If total planned / actual activity quantity (hours, units etc).It is not necessary that all the cost centers need to have activity types associated with them. Ifthere is no output from a cost centre, then there will be no activity type for that cost centre.What is a Resource in CO?Resources are goods / services, consumed by CO objects like cost centre / internal order / WBSelement, which are supplied (internally or externally) to an organization in order to producebusiness activities. The resources are used only in planning and not for tracking the actual.There are three types of resources:• Type B (used in base planning object)• Type M (refers to a material)• Type R (exists only in CO-OM)