Organizational units are used to structure business functions and for reporting. The organizational units of Financial Accounting are used for external reporting purposes, that is, they fulfil requirements that your business is subject to from external parties, for example, legal regulations. The financial statements for example, are created based on the organizational units of Financial Accounting.
Let's take a look at the organizational units in Financial Accounting.
The first organizational unit is Client. The Client is the highest level in the SAP ERP system hierarchy. Specifications or data affecting all organizational units in SAP ERP applications are entered here. This ensures that the user does not have to enter the same information more than once. An example of this is currencies. Each client in an SAP ERP system is an independent unit having separate master records, tables and data. Also remember, in order to logon to a system, you need to enter a client key and have a user master record in the client.
The second organizational unit is the Company Code. The company code is an independent balancing or legal accounting entity. It is the minimum structure required in SAP ERP Financial Accounting. Since most government and tax authorities require the registration of a legal entity for every company, a separate Company Code is usually created for every country. For example, if your company has offices in different countries, each country will have a Company Code.
The Business Area is the third organizational unit. Business Areas are freely definable and are used to create separate financial statements. They can be used across Company Codes and are for internal purposes. Remember, business areas are not assigned to company codes, and their use is optional.
