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In FirstBIT ERP, there are multiple predefined allocation methods. You can use the Accounting > Master Data > Cost Allocation Methods form to view all the available methods and to add new methods.

Generally, an allocation method defines how to allocate specific source amounts. 

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• The To the financial result GL account based on sales volume method uses Sales Volumes calculated for business activities.
• The To the financial result GL account based on revenue method uses Revenues calculated for business activities.
• The To the financial result GL account based on based on cost of goods 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.

For more details, see The Bases for Allocations. If the Production module is enabled in your application, you can easily create allocation methods of the Cost of Goods/Services type based on the available predefined data sources.

Allocation Settings

Using the Accounting > See also > Cost Allocation Settings form, you can specify particular GL accounts (more precisely, records structured as GL Account / Department / Entity) to be used as source of amounts for allocation and which allocation methods should be used for these sources. You can use the predefined allocation settings, edit them, or define new settings. If there are more than one settings for the same GL account or account section, the latest settings will be used.

Balances of some accounts you can move without allocation to another accounts - for this you can select the Close Directly to Profit and Loss option and specify the particular target account from the Profit and Loss section on the chart of accounts, COA.

For accounts which balances you want to actually allocate, make sure that a check box for the Close Directly to Profit and Loss option is cleared – this enables the fields you need to specify the allocation rules.

If If you select the Department Wise Allocation option, you can narrow the base by data records with specific department, that is the department specified in allocation source on the Allocation Settings form. With this option selected in case of the To the financial result GL account based on gross profit method, expenses or revenues will be allocated to the Profit or Loss account proportionally to profits earned by this department in each business activity in which it participated. 

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When the month-end closing process is being executed, for each record GL Account/ Department / Entity, it checks if there is an available allocation setting (rule). If the rule exists, the process applies this rule. If there is no such rule, the process checks if any rule exists for the section of the GL account and applies this rule. If no rule is found, no amount from this GL account will be allocated.

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If source account's records have some non-empty Business Activityparticular business activities specified, the records with the same Business Activity should be excluded from the base data that will be used for proportion calculation.

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