Following are the key differences between Cost Center, Profit Center, and Internal Order.
A Cost center is defined as a component in an organization that adds to the cost and indirectly adds to the profit of the organization. Examples include Marketing and Customer Service.
A company can classify business unit as profit center, cost center or an investment center. The simple and straightforward division in an organization can be classified as cost center as cost is easy to measure.
To create a cost center in system, you need to define a cost center hierarchical structure. The structure of a Cost center and its characteristics depend on the accounting objective and on the system you want to use to maintain accounting.
Cost center is used to align overhead costs with activities performed in an organization. It is possible to assign different activity type to a cost center.
You perform cost center accounting to manage cost in the organization and to check profitability of each functional area and decision-making data.
You can manage and analyze the overhead cost in an organization and verify if they are incurred in the organization activities.
When you plan costs at cost center, this allows you to check the cost efficiency at the point when costs are incurred in the organization.
You can directly assign the cost-to-cost centers for products, services, and market segments, which are involved in performing these activities.
SAP CCA-Profit center is used for managing internal controlling. When you are dividing your company into profit centers, it allows you to delegate responsibilities to the decentralized units and allows you to treat those as separate companies in a company. It also allows you to calculate key figures in cost accounting like- ROI, Cash flow, etc.
Profit Center is a part of Enterprise Controlling module and is integrated with new General Ledger Accounting.
Profit Center Accounting is used to determine profit for internal areas of responsibility.
It lets you determine profits and losses using either period accounting or the costof-sales approach.
It allows you to analyze fixed assets by profit center, thus using them as investment centers. This makes it possible to expand profit centers to investment centers.
SAP CCA - Internal Order monitors the parts of the costs and in few cases, the revenues of the organization.
You can create an internal order to monitor the costs of a time-restricted job or the costs for the production of activities.
Internal orders can also be used for the long-term monitoring of costs.
Investment cost related to fixed assets are monitored using Investment orders.
Period-related accrual calculation between expenses in FI and the costing-based costs debited in Cost Accounting are monitored using Accrual orders.
Costs and revenues incurred for activities for external partners or for internal activities that do not form part of the core business for your organization are monitored using order with revenues.