Cost-of-sales accounting is a method for creating a profit and loss (P&L) statement where operating expenses are categorized by their business function, such as production, sales and distribution, or administration. In SAP S/4HANA, the Functional Area is the specific organizational dimension designed to classify these expenses by function. The system uses the functional area assigned to postings to structure the P&L statement according to the cost-of-sales method, which is a requirement for external reporting under standards like IFRS and US GAAP.

B. Segment: A segment is used for external reporting on different business or geographical parts of an enterprise, but it does not structure the P&L according to the cost-of-sales method.

C. Market segment: This is a dimension used in Profitability Analysis (CO-PA) for detailed internal management reporting and is not the primary object for structuring external financial statements.

D. Profit center: This is an organizational unit for internal controlling (management accounting) to measure the profitability of specific areas; it is not the direct dimension for the cost-of-sales P&L structure.

1. SAP Help Portal

SAP S/4HANA Cloud

"Cost of Sales Accounting": "To create a profit and loss statement (P&L) using cost of sales accounting

you need to sort your operational expenses in Financial Accounting according to functional areas... The functional area indicates the functional area in which the costs were incurred (for example

sales and distribution or administration)."

2. SAP Learning

Course S4F01 - Financial Accounting in SAP S/4HANA

Unit 2: General Ledger Accounting

Lesson: Explain Financial Statement Versions: This course material explains that to represent expenses by function (cost of sales accounting)

the functional area must be activated and used in postings. It contrasts this with the nature of expense method (period accounting).

3. SAP Help Portal

SAP S/4HANA

"Functional Area": "The functional area is an organizational unit in Financial Accounting that classifies the operating expenses of a company... You can use the functional areas to create a profit and loss statement in Financial Accounting using cost of sales accounting."