Create Primary and Secondary Cost Elements

A Primary Cost element is used to transfer cost from FI to CO. It is the cost carrier
from FI to CO. It has to have a corresponding Gl a/c in FI. Every cost related txn will
be carried over to CO by Primary Cost element ONLY.

A Primary cost elements can be directly posted and it is linked to a G/L account and
must first be created in the FI Chart of Accounts.

A Secondary Cost element is used only in txn which are within CO only. There is no
Txn effect in FI. It can be allocation, Distribution Reposting etc within CO ONLY.
These data does not flow to FI.

A Secondary cost elements cannot be directly posted.  An example will be the Cost
Center.  Secondary cost elements can only be created in Controlling.

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Cost element accounting records and groups the costs incurred.  Cost elements are
assigned to a commitment item in Funds Management.  Many cost elements can be
assigned to one CI.  To simplify valuations, planning and cost allocations you can 
combine cost elements into groups (for example, separate groups for salaries and
bonuses).  By combining cost element groups according to their intended purposes,
you can create cost element hierarchies.  This is valuable.

Cost elements describe the origin of costs. Cost element classifies the organizations
valuated consumption of production factors within a controlling area. A cost element
corresponds to a cost relevant item in the chart of accounts. Cost elements are defined
as either primary or secondary

Every Profit and Loss GL account that needs to be controlled has to be defined as a
cost element in SAP. Just as in FI General Ledger Accounts exist, in Controlling we
have Cost element.  Each FI General Ledger Account which is a Profit and Loss
Account is also created as a Cost element in SAP

Primary Cost Elements are those which are created from FI general Ledger Accounts
and impact the financial accounts eg. Travelling expenses,consumption account infact
any Profit and Loss GL account. Primary (Direct Expenses) cost elements arise
through the consumption of productions factors that are sourced externally.
Secondary Cost Elements are those which are created only in controlling and does not
affect the financials of the company. It is used for internal reporting only. The
postings to these accounts do not affect the Profit or Loss of the company.

Secondary (settlement / apportionment from dept to dept) cost elements arise through
the consumption of production factors that are provided internally i.e., by the
enterprise itself.

Secondary cost elements are posted indirectly.

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KA06 - Create Primary or Secondary Cost elements

If you maintain multiple controlling areas, remember to set the CO Area via Extras ->
Set Controlling Area