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Upgrade to Microsoft Edge to take advantage of the latest features, security updates, and technical support. Organizations and organizational hierarchies overview
In this articleAn organization is a group of people who are working together to carry out a business process or achieve a goal. Organizational hierarchies represent the relationships between the organizations that make up your business. OrganizationsYou can define the following types of internal organizations: legal entities, operating units, and teams. All internal organizations are types of the Party entity. Therefore, these organizations use the address book to store address and contact information. A party, which can be either a person or an organization, can belong to one or more address books. Legal entitiesA legal entity is an organization that has a registered or legislated legal structure. Legal entities can enter into legal contracts and are required to prepare statements that report on their performance. A company is a type of legal entity. Currently, companies are the only kind of legal entity that you can create, and every legal entity is associated with a company ID. This association exists because some functional areas in the program use a company ID, or DataAreaId, in their data models. In these functional areas, companies are used as a boundary for data security. Users can access data only for the company that they are currently logged on to. Operating unitsAn operating unit is an organization that is used to divide the control of economic resources and operational processes in a business. People in an operating unit have a duty to maximize the use of scarce resources, improve processes, and account for their performance. The types of operating units include cost centers, business units, value streams, departments, and commerce channels. The following table provides more information about each type of operating unit.
TeamsA team is an organization in which the members share a common responsibility, interest, or objective. Teams cannot be used in organizational hierarchies. Organizational hierarchiesSet up organizational hierarchies to view and report on your business from different perspectives. For example, you can set up a hierarchy of legal entities for tax, legal, or statutory reporting. Set up a hierarchy that is based on operating units to report financial information that is not legally required, but that is used for internal control. For example, you can create a purchasing hierarchy to control purchasing policies, rules, and business processes. Note After an operating unit has been added to a hierarchy, the operating unit cannot be deleted. Each hierarchy is assigned a purpose. The purpose of a hierarchy determines the types of organizations that can be included in the hierarchy. The purpose also determines which application scenarios a hierarchy can be used in. Organizations in a hierarchy can share parameters, policies, and transactions. An organization can inherit or override the parameters of its parent organization. However, shared master data, such as products and address books, applies to the whole organization and cannot be overridden for individual organizations. Creating organizations and hierarchies requires careful planning. For more information, see Plan your organizational hierarchy. Additional resources
FeedbackSubmit and view feedback for Additional resourcesAdditional resourcesIn this articleWhich of the following are characteristics of successful responsibility accounting systems?Which of the following are characteristics of successful responsibility accounting systems? Performance reports that are timely. Performance measurement of responsibility center managers. Budgets prepared for each responsibility center.
What is the definition of a cost center in a business quizlet?A cost center is a unit of a business that incurs costs without directly generating revenues. All of the following are considered cost centers except: Juice division at Coca Cola. A unit of a business that generates revenues and incurs costs is called a: Profit center.
Which tool can be used to easily calculate the change in profit resulting from a change in sales price sales volume variable costs or fixed costs?Which tool can be used to easily calculate the change in profit resulting from a change in sales price, sales volume, variable costs, or fixed costs? CVP analysis allows companies to easily identify the change in profit due to changes in ______.
What would you expect to find in a performance report for a cost center?The performance report for a cost center is a management tool in which the actual costs incurred by the division is compared to the budgeted cost for the actual activity level. Only the costs that the division can control are included in the report.
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