The WIP Allocation by Cost Object document is designed to manage the allocation of expenses, such as salaries, labor, and other costs, to designated cost objects—a practice that is not commonly found in standard accounting procedures. For instance, payroll calculations are typically handled by the payroll department without consideration of specific cost objects, due to limited access or information about Cost Objects (CO) or projects. This system enables the initial recording of expenses such as salaries, depreciation, or electricity as Work in Progress (WIP), with the flexibility to allocate these expenses to specific cost objects at a later stage.
You can access this document- Go to Accounting > WIP Allocations by Cost object
In this manual, an example of Payroll will be discussed
Create a new WIP Allocations by Cost object.
In the main tab, add the transaction type Allocation of Labor Costs and entity
In the Allocation source tab, select the Payroll Calculation document to allocate labor costs. Click Fill from Basis to auto-populate departments, positions, and employees. Manually add or remove entries and reorder as needed.
In the Allocation Base tab, Select Detailing to Employee to allocate costs per employee to multiple Cost Objects. Uncheck it to split a lump sum of labor costs among Cost Objects. Use the Employee column to choose specific employees, the Cost Object column for allocation of cost objects, and the Coefficient column to define the proportion of costs for each Cost Object.
On the Allocation tab, review the costs and results; click Fill and Allocate to auto-populate data, or use Add to manually enter and complete the required columns.
The Allocation Results Pane displays allocation results for the selected row by default (uncheck to see all), with columns for Cost Object (target), Coefficient (allocation proportion), Quantity (amount allocated), Unit Cost (Acct. Cur.) (cost per unit), Amount (Acct. Cur.) (total allocated cost), and Transaction Content (descriptions for journal entries).
The total expense of AED 5000 will be divided in the Allocation Results Pane according to the coefficient ratio (e.g., 40:60) after clicking Fill and Allocate.
In the additional information tab, fill the responsible person and department.
Once all the data are filled and cost is allocated to the cost object, post the document.
The below entry will be created, same GL will be in both DR and Cr side only with cost object allocation.
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