Difference between Profit Centre and Business Area

Updated May 18, 2018

Business Area vs Profit Centre

Difference between Profit Centre and Business Areas are as under:

1. Profit centers are used for internal management whereas Business areas are geared more towards external purposes.

2. Distribution or assessment within profit center can be done for allocation of overheads but no such allocation functionality is possible within business area.

3. Hierarchical structure for profit center can be created while it is not possible in a business area.

4. Business areas needed not be assigned to organisational structure while profit centers are defined in controlling area.

5. Profit Centre Accounting (PCA) helps to arrive at profitability of business unit while business area is used to segregate FI transactions pertaining to various activities.

6. Profit Centre Accounting (PCA) is adopted product wise in companies while business area would be applicable only when areas of business areas are different.

7. The concept of business area is used for making strategic decisions by the management whereas the primary purpose profit centre is accounting.

Comments

07 Nov 2011 5:49 am venkatesh kolluru Helpful Answer
Business Area and profit centers are literally mean the same.Profit center Reports are for Internal Reporting purpose & Decision Making. And Business Area Reports are for draw the Financial Reports

25 Dec 2011 8:30 am obulesu Helpful Answer
The difference between business area and profit center is, through the profit center we know department wise profit and location wise profit,so this is used only internal reporting purpose. Through the business area we can extract financial statement like profit and loss account, balance sheet. This is used for external reporting purpose.