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Primary Cost Elements

Primary cost elements are used to transfer costs from financial accounting to cost accounting. They must have a corresponding general ledger account and all cost transactions will be carried over through primary cost elements. Primary cost elements impact financial accounts like expenses. Secondary cost elements are only used for transactions within cost accounting and do not affect financial accounting. They are used for internal reporting like allocations and distributions.

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308 views2 pages

Primary Cost Elements

Primary cost elements are used to transfer costs from financial accounting to cost accounting. They must have a corresponding general ledger account and all cost transactions will be carried over through primary cost elements. Primary cost elements impact financial accounts like expenses. Secondary cost elements are only used for transactions within cost accounting and do not affect financial accounting. They are used for internal reporting like allocations and distributions.

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srinivas
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Primary Cost Elements:

 A Primary Cost element is used to transfer cost from FI to CO.


 It is the cost carrier from FI to CO.
 It has to have a corresponding Gl a/c in FI.
 Every cost related txn will be carried over to CO by Primary Cost element ONLY.
 A Primary cost elements can be directly posted and it is linked to a G/L account and
must first be created in the FI Chart of Accounts.
 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. Primary (Direct Expenses) cost elements arise
through the consumption of productions factors that are sourced externally.

PRIMARY COST ELEMENT CATEGORIES:


 1. Primary cost / costs redacting revenues. This used for expenditure accounts
 3. Accrual / Deferral per surcharge :This is used for month end provisions only in CO
11. Revenues: This is used for income accounts
 12. Sales Deduction:
 This is used for expenditure accounts like sales commission Trade discount where
CO-Profitability analysis module is activated
 22. External settlement( Settlement from CO – FI): This is used for allocation of
internal order settlement to GL Accounts / Assets.

Secondary Cost Elements:


 A Secondary Cost element is used only in txn which are within CO only.
 There is no Txn effect in FI.
 It can be allocation, Distribution Reposting etc within CO ONLY.
 These data does not flow to FI.
 A Secondary cost elements cannot be directly posted.
 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.

SECONDARY COST ELEMENT CATEGORIES:


 21. Internal settlement (Settlement from CO to CO) This is used for allocation of
internal order settlement cost to cost centers.
 31. Order/ Project Results analysis: This is used for work in process calculations is
product costing.
 41. Overheads rates :This is used for calculation of raw material overhead rate /
Production overhead rate in product costing .
 42. Assessment: This is used for allocation of primary cost element posing and
secondary cost postings from one cost center to other cost centers.
 43. Internal Activity Allocation: This is used for calculation of activity types in
production cost. Eg: Machine hours rate / labour hour rate in product costing.

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