What is Company Code?

Company Code is a unique four alphanumeric characters that represents an independent and legal
accounting entity. It’s the smallest and minimum necessary organizational structure in SAP that
required by law to provide a set of financial reports (such as Balance Sheet and Profit/Loss
Statements). In the real world, a company code can be a company of a corporate group. In an SAP
client, there can be one or several company codes. The general ledger is kept at company code
level. For consolidation process in SAP EC module, a company code must be assigned to a
company. A company can comprise one or more company codes.
With SAP FI module, we can generate the financial reports of a company code. A company code’s
financial reports are used for external purpose, such as for external auditors, shareholders/stock
exchange commission, tax office, etc.
Company code is one of the two main organizational units of SAP FI module. The other one is
Business Area. Business areas are used for internal purpose, such as for company’s management.
Business areas represent separate areas of operation within one or some companies. With business
areas, for example, SAP can generate financial reports of a specific regional area of a company.
Let’s say ABC company has one company code in USA (and several company codes in the whole
world). With company code, SAP can only generate one set of financial reports for USA office. But,
with business areas (depends on how it configured), SAP can generate sets of financial reports per
state in the USA. By doing so, the management can analyze the performance of each branch in
each state better. It gives more useful information that can be used in decision making process. The
use of Business Areas is optional in SAP FI module.All SAP transactions that have impact to the
financial reports from all SAP modules (such as FI, MM, HR, etc) will generate accounting journals in
company code’s general ledger.
The transaction can determine the company code involved either from the user input for the
company code (such as in FI module) or from other organizational unit that related to the company
code (such as in MM module, company code can be determined from the plant that input by user).
In MM module (Logistics), each plant must be assigned to a company code. A company code can
have several plants.
A plant can also be assigned to a business area. A business area can be assigned to several plants.
Material valuation can be set at company code level or plant.