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The Cost controlling, planning, and monitoring is one of the major responsibility of Management and Costing Department of any organization which included managing cost and expenses at different organization levels e.g; department wise, Project/ Job wise e.t.c. There are lot of tools and even specific module in SAP like Project System (PS) to do Project costing. In this blog, I am going to discuss Project/ Job order costing through SAP Controlling.

Internal is the mini cost object within a Controlling Area. It support action-oriented planning, monitoring, and allocation of costs for particular project or job. Internal orders are uses to:

  1. Monitor internal jobs settled to Cost Center (Overhead Orders)
  2. Monitor Internal jobs settled to Fixed Assets (Investment Orders)
  3. Offsetting postings of accrued costs calculating in CO (Accrual Orders)
  4. Display the cost controlling parts of Sales and Distribution customer not affect the core business of the company (orders with revenues)

The Internal Orders are functionally divided into two categories,

Real Order which can further settled the collected cost to others cost objects e.g; Fixed Asset or Cost Centers

Examples of real orders are Overhead Orders and Investment Order

Statistical Order which cannot further settled the collected cost and use for only monitoring purpose.

Example of Statistical Order includes Order with revenues

Order with Revenues (Statistical Order):

It is use to display the cost controlling parts of Sales and Distribution customer not affect the core business of the company

The above diagram depicts the example of Order with Revenues in which there is one GL account ‘Telephone Expenses’  and  there are 5 telephones.

Now, to record  telephone wise expenses in three cost centers, we create five Internal Order for each telephone. While posting Tel phone expenses in FI, Internal Order (Telephone No) along with real cost center will be entered in JV posting.

Overhead Order (Real Order):

It is use to Monitor internal jobs settled to Cost Centers (Type: Overhead Cost Center).

The figure above shows the example for Overhead orders, in which their is a cost center for ‘sales department’ and several activities like promotional events happen in the department. For every event certain expenses incur. Now, in order to record and analyze expenses Event wise. We create an Internal Order for each event.

Investment Order (Real Order):

It is used to monitor the Internal jobs settled to Fixed Assets.

The above figure illustrates the process the Investment order in which Project Building expenses are  recorded and after full completion of it is capitalized to Fixed Asset “Building”. Till then CWIP-Building will be recorded in Balances sheet for every period.

In order to do this, an Internal order for Project Building is created. Settle the order every month to AUC ‘CWIP–Building’ to reflect CWIP in periodic Balance Sheet. After full completion of Project, close and settle the order ‘Project Building’ to AUC “CWIP-Building”. Now capitalize the Fixed Asset ‘Building’ by settling AUC ‘CWIP-Building’ to it.

This articles discuses the basic uses of Internal Order functionality for various costing processes in an organization. In my next blog, I will discuss configuration steps and posting cycle (including actual planning and budgeting) for Internal Order. Till then it is suggested  to the reader to go through the links in references.

At last I would like appreciate the time you took to read this blog. Hope your knowledge on subject matter is augments after reading the blog.

References

https://www.guru99.com/all-about-internal-order.html

 

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