Problem: How to fix the Month End Closing Allocation error?
Solution: Implement the appropriate Cost Allocation Methods.
Overview: The month-end closing process involves automatically generating specific documents and verifying and adjusting GL account balances at the end of a period. This tool is also essential for closing the financial year.
To access Month End Closing document, go to Accounting > Service Tools > Month End Closing:
2. After opening the form, review and complete the required details before running the month-end closing process.
Choose the appropriate entity if you are using Multi-Company Accounting. Set the desired year, which will be displayed at the center of the screen; you can use the right and left arrow buttons to adjust it. Then, select the month you want to process from the left column.
3. After selecting a month, you will see which processes are available and which are not needed. A yellow triangle next to the month indicates that Month End Closing was either not completed successfully or may require manual adjustments. When the triangle turns green, it signifies that the month has been successfully closed.
4. During the month-end closing process, you may encounter various allocation errors. For example, an error might arise due to issues with Allocation Settings
This error occurs when the month-end closing process fails to finalize values according to the Allocation Settings. Cost Allocation Methods are utilized to distribute indirect and overhead costs to various cost centers, such as finished goods, work in progress, departments, and business activities. The allocation source amount will be distributed between the business activities specified for the GL accounts intended for the financial results proportionally to the cost of goods sold, gross profit, sales volume, actual production cost associated with the business activities
5. Please find Cost Allocation Methods and more information about them in Accounting >Master Data > Cost Allocation Methods:
6. Find all the allocation methods, the sources and their allocations:
7. Return to the error. It indicates that this month’s sales are insufficient to cover the costs. Consequently, the costs should be directly allocated to the Profit and Loss account.
8. To adjust the settings, navigate to Accounting > See also > Cost Allocation Settings. Here, you will find a list of cost allocation settings for all account types. Locate the account with the error, open it, and make the necessary adjustments.
9. To check the account that has an error, refer back to Month End Closing (it’s Depreciation of Fixed Assets).
Open this account from the Charts of Accounts: Accounting > See Also > Chart of Accounts.
Find and open the required account and copy its section.
10. Go back to Cost Allocation Settings find this section there and open the account type.
11. Choose the Account type and click on the copy option
12. The period should be the beginning of the month in which the error occurred. Enable the option ‘Close Directly to Profit and Loss’ and choose GL Account for Allocation – ‘Profit or Loss’.
Please note it is important to check the Entity indications Cost Allocation form:
if a specific Entity is specified in the Entity field, then the month will be closed only for that one.
We recommend making the settings for each entity separately - that is, making the settings as many times as you need for how many entities you do accounting for. Or, on the contrary, do not specify a specific Entity when setting up, then the setting will be automatically applied to all entities.
12. Once settings are done, go back to the month-end closing and execute it again.
The error has been corrected, and the amount was directly posted to the Profit and Loss account.
13. Open a Report to see that Depreciation was close directly to Profit and Loss:
Please note: After the month has been processed, create a new cost allocation settings document for the upcoming month, ensuring the settings are set to default. The period should be set to the beginning of the following month. For example, if the error occurred in January, apply the settings for January and revert to default settings starting from February (Creation of new cost allocation settings). Access the Cost Allocation Settings, choose the correct cost allocation method (as it was by default), and save the document.
A new cost allocation settings document is only created when an error occurs. For regular month-end closings, the default allocation settings should be used.
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