Generally, cost allocations include identifying the sources of indirect costs such as administration expenses and spreading these costs among cost objects, such as finished goods and services, unfinished goods (work in progress), sold items, or other objects. Also, cost allocations are used for allocating the incomes or expenses for financial reporting purposes.
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When creating a new manual allocation, you can select a specific account (from the Expenses section on the chart of accounts or from the Work in Progress subsection of the Assets section) and specify the source amount which you need to allocate. Then you can select multiple target accounts and for each specify the amount to be moved to it. The sum of allocated amounts must be equal to the source amount.
You must perform Any manual cost allocations must be performed before you run the period closing process with automatic allocations. The accounts involved in manual allocations, will not be processed by the automatic allocations.
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- Allocate costs: For Cost Allocation Methods with the Cost of Goods / Services option selected.
- Calculate financial result: For Cost Allocation Methods with either the Profit and Loss option or the Close Directly to Profit and Loss option selected.
The Month-End Closing service tool uses the data sources and allocation methods defined by using the following forms:
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In FirstBIT ERP, most of predefined allocation methods are of the Profit and Loss allocation type. In allocations of this type, the source amounts are distributed proportionally to specific values calculated per business activity. For example, the available predefined methods use the following bases for calculating as the allocation proportion:
- Sales Volumes calculated for business activities ("The To the financial result GL account based on sales volume")Revenues method uses Sales Volumes calculated for business activities (".
- The To the financial result GL account based on revenue")Costs of Goods Sold method uses Revenues calculated for business activities (".
- The To the financial result GL account based on based on cost of goods sold")Gross Profits sold method uses Costs of Goods Sold calculated for business activities (".
- The To the financial result GL account based on gross profit method ")uses Gross Profits calculated for business activities.
Generally, the base or the data for proportion calculation is a structure of the following records: GL Account / Entity / Expense Item or Income Item / Business Activity / Item / Amount.
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