Cost Centers Concept & Segment

[admin]

<b>Cost Centers Concept & Segment</b>

<b>What it is:</b> The smallest organization unit on which expense can be booked in order to analyze that organization unit by the management. In Oracle EBS Accounting Key Flexfield a segment is created and Cost Center qualifier is assigned to that segment. Now at the time of creating invoice the entry operator selects the relevant CC.

<b>Why it is:</b> It helps in analyzing the expenses at that organization level.

<b>Who will set this:</b> At the time of General Ledger setup in the Accounting Key Flexfield.

<b>When it is set:</b> During Initial Implementation stage it is set and irreversible

<b>Where it is set:</b> In General Ledger module a segment is created in the Accounting Key Flexfield.

<b>How it is useful with Examples:</b> It is very important to under the concept of CC and let me try to explain in a very simple way with examples. Just consider you are manager of IT department and you have a team of people each having different tasks. We will divide them on the basis of their job activities into three areas and each area with own supervisor,

<b>Department IT</b>
? Network (3 employees)
? Support (6 employees)
? Development (6 employees)

If we just take the example of monthly traveling expense then there are two ways to book the expense. One is to book at department level means all traveling of IT. While the 2nd is to divide department into different sections (CC) and book expense at the CC level. Means if network employee traveled then the expense will be booked in network CC means at the time of creating invoice relevant CC will be selected. With this 2nd approach you as manager IT can take reports of Cost Center Wise Expenses and can better analyze your expenses and you can check with you supervisor if you think the expenses were so high etc.

[AmanKhan]

thanks Admin.,

its really simple and easy definition of CC concept.

[oracleapps1983]

Hi Admin

Suppose if i select one of the Segment (Let us Assume Department is Cost Center Segment, Which is not Natural and Balancing Segment). How can i know how much cost is expended towards that. Is there any standard reports.

In Fixed Assets Module Enabling Cost Center Segment is mandatory. If Yes can tell me why.

Thanks

[SIVAKUMAR_G]

Hi

You can define FSG reports based on Cost center which is not Balancing segment or Natural account and still you can generate reports.

You can run Trial Balance - detail report with Cost center as secondary segment and generate cost centerwise expense incurred across the company. But this will not provide a Tallied trial balance as Cost center is entered for only Revenue and Expense items and not for assets or Liabilities or Owner's equity

Regards
Sivakumar

[SIVAKUMAR_G]

Dear Admin

Please add the following point to What it is section.

Define Security Rules in GL so that all cost and revenue entries cannot have default zero values. This will help you to generate Proper Cost centewise reports either as a Cost center or Profit center.

Regards
Sivakumar