Business Area&Functional Area
Business Area
The function of business areas is to create balance sheets and Profit and Loss statements below the company code level. Some common uses of business areas are to produce divisional financial statements or SEC segment-level reporting. It is important to note that business area functionality can be duplicated using Profit Center Accounting. The decision to use or not to use business areas should be made early on in the design phase of your project. Many new projects are leaning away from business areas and toward profit centers, but ultimately, the decision is an individual project decision based on what fits in to the overall system design of the project implementation. Some of the deciding factors are the need to report on business lines across company codes, the need for full balance sheets at the divisional or business line level, as well as the cost and benefits of business areas versus profit centers.
The functional area is an organizational unit in accounting that classifies the expenses of an organization by function.
It organize your business for cost of sales accounting. It allow you to segregate and classify different types of costs within one expense account. For e.g. a single labour account to determine what amount of labour is spent directly on production as compare to sales or hr.
