Answer / pradeep patil

I would like to add some more value addition pts with
distinguish between BA & PC

(.)Main distinguishing factor is that Distribution or
assessment within profit center can be done for allocation
of overheads.

No such allocation functionality is possible within
Business area.

(.)Hierarchical structure for profit center can be created.

Hierarchical structure for business area is not possible.

(.)Business area does not need to be attached to any
organization structure.

But profit centers can be created under the controlling
area.

(.)PCA helps to arrive at profitability of business unit

Business area is used to segregate FI transactions
pertaining to various

(.)Profit Center Accounting as the Product manufactured.

Business area would have been useful only when the Areas of
Business are Different.

(.)Business area concept is used for making strategic
decisions by the management whereas the primary purpose of
profit center is accounting.

(.)PCA would be much more suitable. You may need some
derivation rules for Populating Profit centers, but it
would be much more easier than using Business area and
reconciling FI-CO on monthly basis.

(.)The main difference between profit centers and business
areas is that profit centers are used for internal
management whereas business areas are geared more towards
external purposes.

Answer / sapna

profit center is for internal purpose reporting & also it is
for detecting the cost & income received from a single
product of a company where as business areas are meant to
analyze multiple product in a particular company.

Answer / g.srinivas

both bussiness area and profit center are used for internal
accounting purpose only both are used by management to have
keen look into the bussiness with respective prob and cons
but now a days companies prefer profit center instead of
bussinessarea is it suppports enhancements because it is
tightly integerated with other modules especially with fi-
sl both concepts use same tables etc

Answer / madhu

Please try to be more specific in what ever u r trying 2
say. New commers will not be able to understand this,tell
in more detail

Answer / satish

Profit Center is used to analyse the profit of the
different departments and branches within the organisation.
This helps for the reporting purpose of the profitability
of an organisation for the the particular period. Where we
do find vary in the profitablity (Numbers) of an
organisation from time to time.

Business Area describes the nature of the business of an
organisation. This remains stagnant irrespective of changes
in the profitability until an organisatiion decides to
changes its nature of the business, which again an extream
scinario.

Answer / pushkar

Good Answer Pradeep.

I would like to undeline that both BA PC are for internal
purpose (management requirement and decision).

Main point of difference people forgot here is BA satisfies
accounting purpose while PC satisfies CO purpose.

One more piece of info I know but not sure if true is, BA
was used as function oriented (e.g. SALES, ACCOUNTING etc)
as per old school where we used to separate B/S as per
functionality. But PC is more related with group of
products or COS (COGS) view.

Please correct me if I am wrong

Answer / satish madhu

Profit Center Accounting:
If any product has to move from different stages from raw
materials to semi finished goods and to finished goods the
cost of production and the value addition to that product
will differ. To analyse this cost of product and the
profits from one stage to another PCA is used.

Business Area.
As pointed above as there are different stages of prodction
that a product moves to turn as finish product if a company
has different business of dealt with different business,
the profitability would be arrived business areawise.

Example:
Ruchi Industries Limited has different business:

a. Soya food trading
b. Bakery food trading
c. Oil business
d. Infrastucture business etc...

It is true that these are used for internal reporting.

Answer / soumo

Business area will have many profit centers. For example Vehicle is a business area in a company. Vehicle can be cars and Bikes etc. Here Vehicle is business area and Cars and Bike are profit centers. In broad Vehicle is a profit center. But as it has sub areas those are profit centers. So profit centers cannot be replaced with business area and vice versa. We can replace business area by Profit centre, only condition is that it should be in same controlling area. The business area is more like a business unit of a company. You can have multiple profit centers within a business area.
Main distinguish factor is that distribution and assessment in possible in profit center but not in business area.
One more distinction is that Business area need not be attached to any organisation structure. But profit centres can be created only under the controlling area. Business area can be across controlling area.
Business area concept is used for making strategic decisions by the management whereas the primary purpose of profit centre accounting is responsibility accounting.

Answer / rohit nayi

Actully I dont know

Answer / rabi narayan sahoo& biswarmbar

Business Area and profit centre literally means same.
In Business area,we analyse results products wise(more
products) and use for financial report purpose.
Profit centre results analyse product wise(one-to-one) and
usede for controlling purpose.

What is cost based profitability analysis? : cost center accounting

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