Primary Cost element and Secondary Cost Element

Every Profit and Loss GL account that needs to be controlled has to be defined as a cost element
in SAP. Just as in FI General Ledger Accounts exist, in Controlling we have Cost element.
Each FI General Ledger Account that is a Profit and Loss Account is also created as a Cost
element in SAP.
Primary Cost Elements are those which are created from FI general Ledger Accounts and
impact the financial accounts eg. Travelling expenses, consumption account infact, any Profit
and Loss GL account.
Secondary Cost Elements are those which are created only in controlling and does not affect
the financials of the company. It is used for internal reporting only. The postings to these
accounts do not affect the Profit or Loss of the company.
The following categories exist for secondary cost elements:
Internal Settlement: Cost elements of this category is used to settle order costs to objects in
controlling such as cost centers, pa segments etc.
Order/Results Analysis: Used to calculate WIP on the order/project
Overhead: Used to calculate indirect costs from cost centers to orders
Assessment: Used to calculate costs during assessment
Internal Activity Allocation: Used to allocate costs during internal activity allocation such as
Machine Labour etc
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How can I find out the GL accounts of Profit & Loss type for which Cost Elements have
not been created?
Is there a standard report to throw these exceptions?
What is the best control to ensure that cost element is created for all expense accounts in
GL?
Well, the first thing that comes to mind is just download the GL Accounts, download Cost
Elements and do a quick VLookup in Excel. That will tell you. That'll take you about 5 minutes
or so.
or
You could try this respective transactions:
OKB2;
OKB3; and
SM35
To prevent creating of GL P&L items without creating the cost elements on 4.6 / 4.7 there is an
option to allow the automatic creation of Cost Elements whenever a G/L account is created in a
Company Code. i.e. It does not create when an account is created at the Chart of Accounts Level,
only when it is created in a Company Code.
To do this;
// Financial Accounting // General ledger Accounting // G/L Accounts // Master Records //
Preparations // Edit Chart of Accounts List // Select the Chart of Accounts then;
Integration // Controlling Integration // then I'll let you guess.
Also, you need to specify within controlling which account ranges should be created under
which Cost Element Category;
// Controlling // Cost Element Accounting // Master Data // Cost Elements // Automatic Creation
of Primary and Secondary Cost Elements // *.*
If this was configured, you could also create a batch file now that would catch up with any cost
elements not yet created.

Items in a chart of accounts (FI) and in cost controlling (CO) that are relevant to cost, are referred to as
cost elements. They represent the nature of costs incurred and are used for entering all costs within the
entire cost accounting system.
There exist 2 types of cost elements in SAP:
Primary Cost Elements are used to transport costs from FI into CO. Primary cost elements have
corresponding general ledger accounts in FI. They are also used for distribution within CO where the
original cost element is used to move costs between cost collectors, such as cost centers and internal
orders.
Secondary costs elements are used exclusively in CO to identify internal cost flows such as
assessments or settlements. They do not have corresponding general ledger accounts in FI and are
defined in CO only.

Part of SAP Controlling module is Cost Element Accounting. It is under this area where you
maintain directly master data of cost elements. Just to refresh your mind about cost element.
There are two types of cost elements in Controlling, namely; primary and secondary cost
element. Primary cost elements are use to transfer P&L account postings in Financial (FI) to
Controlling (CO). It is a requirement that all P&L accounts should have a primary cost
elements; otherwise, transactions can not be posted involving P&L accounts in FI. On the other
hand, secondary cost elements are use only for allocation and assessment purposes as period-end
process.
Some might have created already a cost element. The question now is, how did you create the
cost element? You could have created manually for each P&L Account. My dear readers, it’s
really a tedious activity to create cost element manually.
Now here is the tip. You can create primary cost elements automatically for all P&L accounts.
You just follow this procedure:
1. First, set-up the settings in your Chart of Accounts. Follow this configuration path:
IMG → Financial Accounting (New) →General Ledger Accounting (New) → Master Data
→ G/L Accounts → Preparations → Edit Chart of Accounts List.
Transaction Code: OB13
The “Change View List of All Chart of Accounts: Details ” screen appears.

Set the Controlling Integration to “2 Automatic creation of cost elements” (see highlighted item),
and save your work.
2. Second step, Specify the default cost elements that will be automatically created. Follow this
configuration path:
IMG → Controlling → Cost Element Accounting → Master Data → Cost Elements →
Automatic Creation of Primary and Secondary Cost Elements → Make Default Settings.
Transaction Code: OKB2
3. Third step, Create Batch Input Session for the automatic creation of cost elements. Follow
this configuration path:
IMG → Controlling → Cost Element Accounting → Master Data → Cost Elements →
Automatic Creation of Primary and Secondary Cost Elements → Create Batch Input Session.
Transaction Code: OKB3
4. Fourth step, Execute Batch Input Session.
Transaction Code: SM35
Result: The cost elements specified in step 2 will be automatically created

Cost Element Master in SAP

March 13th, 2009 by admin Leave a reply »
Cost Element Master in SAP

Primary / Revenue Cost element :

Primary / Revenue Cost Element is a carrier for transmitting cost or revenue respectively from FI to CO
module. Items in a chart of accounts that are relevant to cost or revenue are referred to as either Primary
or Revenue Cost element in controlling.

Secondary Cost element :

Secondary Cost Element is a cost element that is used to allocate costs for internal activities, overhead
cost and assessment. Secondary cost elements do not correspond to any G/L account in Financial
Accounting. They are used only in Controlling and consequently cannot be defined in FI as an account.
Cost element category determines which cost elements can be used for which business transactions.

Following are the primary cost element categories.

Primary Cost element Categories | Description | Usage

01 | Primary Cost / Cost- reducing revenues | FI to CO postings of expenses

11 | Revenues | FI to CO postings of revenues
90 | Cost elements for Balance Sheet Accounts in FI | Budget checking for capital procurement

Following are the secondary cost element categories.

Secondary Cost element Categories | Description | Usage

21 | Internal settlement | Cost object to Cost object settlement within CO

31 | Order/project results analysis | WIP Calculation for Production orders & Project System
41 | Overhead Rates | Overhead cost sheet
42 | Assessment | Allocation Cycle in CO ( Cost Center )
43 | Internal activity allocation | Used in Activity Allocation to Production Orders

Note :
Finance : All cost & revenue transactions occurring directly or indirectly through cross module integration
in FI will be carried to respective Cost object (eg.Cost Center, Internal Order, WBS etc ) through primary
cost element.

Planning : Planning of cost, revenue and activity related to production is carried out in respective cost
object through primary & secondary cost element.

SAP T Code to be Used

Create Primary Cost Element : KA01

Create Secondary Cost Element : KA06
Change Cost Element : KA02
Display Cost Element : KA03
Delete Cost Element : KA04
Display Change to Cost Element : KA05
Display Cost Elements-Collective : KA23
Delete Cost Elements-Collective : KA24
Create Cost Element Group : KAH1
Change Cost Element Group : KAH2
Display Cost Element Group : KAH3