How to define functional area in SAP FICO

The following SAP tutorials explains how to define functional area in SAP financial accounting step by step based on real time business scenarios.

Before referring this configuration steps, we recommend to read how to define company code in SAP and how to create business area in SAP.

What is Functional Area?

In SAP, functional area is an organizational unit that sorts operating expenses incurred based on the activities. For example Production, Administration, sales, research & development, etc.

  • Functional areas allows to create financial statements to meet the US GAAP requirements.
  • If the organization  is following cost of sales accounting, it is mandatory to create functional area in SAP and properly assign in various master data.
  • You can enter functional area in the master data of
    • G/L account
    • Cost element
    • Cost center
    • Orders
    • WBS elements, etc.

Scenario: – In this configuration, we are going to define the following functional areas in order to meet the organizational requirements.

Functional AreaDescription
TK14Research & Development

You can define functional area in SAP by using any one of navigation method or transaction code.

Step 1) Enter transaction code “FM_FUNCTION” in the sap commend filed and enter to continue.

Step 2) From process functional area screen, enter the four digits key that identities functional area in SAP and click on create functional area button to define the functional areas as per the organizational requirements.


Step 3) Now update description of functional area.

Define Functional Area in SAP

Step 4) Click on save button and save the configured functional area details. You get a message as “Functional area TK11 has been saved.

Successfully we have created new functional area “TK11” in SAP system.