Creating Primary and Secondary Cost Elements in SAP FICO

Cost elements in SAP FICO are critical for tracking and analyzing costs. They are classified into two types: primary and secondary. This step-by-step guide explains how to create both primary and secondary cost elements with examples.

Step 1: Access Cost Element Maintenance

To begin creating cost elements:

  • Log into SAP and enter transaction code KA01 for primary cost elements or KA06 for secondary cost elements.
  • Alternatively, navigate via the SAP IMG path: Controlling > Cost Element Accounting > Master Data > Create Cost Element.

Example: Upon executing the transaction, you are prompted to enter the cost element details.

Step 2: Define a Primary Cost Element

Primary cost elements are linked to GL accounts and capture costs from external sources:

  • Enter the Cost Element Number (e.g., 400000).
  • Provide a Name, such as "Salaries Expense".
  • Select a Cost Element Category (e.g., 01 - Primary Costs/Revenue).
  • Assign a valid Validity Period (e.g., 01/01/2024 to 12/31/2024).
  • Save your entries.

Example: A primary cost element "400000 - Salaries Expense" is created for the fiscal year 2024.

Step 3: Define a Secondary Cost Element

Secondary cost elements are used for internal cost allocations and do not have a corresponding GL account:

  • Enter the Cost Element Number (e.g., 900000).
  • Provide a Name, such as "Cost Allocation".
  • Select a Cost Element Category (e.g., 21 - Internal Settlement or 42 - Assessment).
  • Assign a valid Validity Period (e.g., 01/01/2024 to 12/31/2024).
  • Save your entries.

Example: A secondary cost element "900000 - Cost Allocation" is created for the fiscal year 2024.

Step 4: Verify Cost Element Creation

After creating the cost elements, verify their accuracy:

  • Use transaction code KA03 to display a cost element.
  • Review details such as the name, category, and validity period.
  • Ensure the cost elements are correctly linked to relevant cost objects or GL accounts (for primary cost elements).

Example: Displaying cost element "400000" confirms it is linked to the GL account for "Salaries Expense".

Step 5: Assign Cost Elements to Cost Centers

For operational use, cost elements need to be assigned to cost centers:

  • Navigate to transaction code KP06 to enter planning data for cost centers.
  • Assign the created cost elements to the relevant cost centers.
  • Ensure planned or actual costs can flow through these elements during transactions.

Example: Cost element "400000" is assigned to the HR cost center for tracking salary expenses.

Conclusion

Creating primary and secondary cost elements in SAP FICO is essential for effective cost tracking and internal allocations. By following these steps, you can set up cost elements tailored to your organization's financial and operational requirements.




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