Cost Center and Profit Center in SAP: What is the Difference?

What is Cost Center in SAP?

Cost Center in SAP is a component in which the costs occur inside an organization. It is an organizational unit within a controlling area which represents locations where costs occur. It helps to capture the costs of an organization. It does not directly generate revenue but incurs additional expenses to operate.

What is Profit Center in SAP?

Profit Center in SAP is an organizational unit of SAP Controlling for internal controlling. It helps organizations to manage costs and revenues. It also allows organizations to evaluate a specific unit within the company. It evaluates the profit and loss of individuals as well as independent areas of an organization.

Next, we will compare Cost Center vs Profit Center vs Internal Order.

Let’s quickly see the difference between Cost Centre and Profit Centre:

Profit Center

1. Profit center is an organizational unit in Accounting that reflects a management-oriented structure of the organization for the purpose of internal control.
2. Profit Center Accounting evaluates the profit or loss of individual, independent areas within an organization.
3. These areas are responsible for their costs and revenues.

Cost Center

1. SAP Cost Center is the organizational unit within a controlling area that represents a location where costs occur.
2. Organizational divisions can be done on the basis of functional, settlement-related, activity-related, region/section/department related, and/or responsibility-related, to monitor actual and plan figure standpoints within Cost Center Hierarchy.
3. Where cost is captured.

Internal Order

1. An internal order is used to accumulate cost for a specific project or task for a specific time period.
2. An internal order is therefore used for a short period with a specific deadline.