What is Company Code and Company?

What is a Company Code?

-> An organizational unit in SAP FI which represents a legal entity.

-> Set of accounts can be created for this legal entity to export Balance Sheet, Profit and Loss Statements.

-> Includes accounts required for posting and recording of financial transactions in SAP.

What is a Company?

-> Smallest organizational unit for which individual Financial statements can be drawn based on legal requirements (Balance sheet, Profit and Loss Statements)

-> Consists of one or more company codes.

-> All company codes within the company, must use same transaction chart of accounts, and same fiscal year.

Simply, understand in this way:

Let's say we have company - HAPPY PVT LTD.

Head Office: Bangalore, India.

Spread across countries - US, Spain, Australia.

Now we need to create company codes for all countries- India, US, Spain, Australia.

Let's call them respectively - IN01, US01, SP01, AU01.

This step is vital in FI, because every company will have it's own legal requirements and reporting based on the Govt rules. 

To submit the Financial statements to authorities several company codes are required for every country. 

Also these company codes helps organization to understand how the business is performing at company code/country level. Since reporting can be done across company code level, it helps in meeting sales targets, and in making better decisions.

Thanks for reading.