Understanding the General Ledger Allocation Feature
The G/L Allocation feature reduces the amount of time you spend entering information each month. It lets you allocate an expense from one account and redistribute the expense to different accounts using amounts based on percentages. If you spread company expenses between departments such as utility, payroll, insurance, or vehicle expenses, you can greatly reduce the time you spend calculating the amount of each department’s expenses. You can simply run the program, let the system calculate the percentage amount, and post the information to general ledger. In addition, if you use the master expense account to pay expenses on behalf of the entire company, you can allocate a portion of the expense back to the master account or to the different departments within the company. Once you enter the account information, there’s no need to reenter it. It remains in the system, so you can run the program consistently every month.
Before you begin using the G/L Allocation feature, it helps to understand how the account information is posted to general ledger. Allocation journal entries fall into four basic categories: fixed dollar allocations, fixed percentage allocations, total of all accounts allocations, and multiple profit center allocations.
A fixed dollar allocation entry takes a set amount from one account and redistributes it to different accounts. Because the dollar amount allocated remains the same, this redistribution can be performed currently using 88 series batch entries.
The three remaining categories use fixed percentages and a total-of-all-accounts method to determine the amount to allocate. Use the general ledger allocation feature to post these types of allocations. Each of the three remaining allocations are discussed below.
Note: These examples assume that you are using, or are familiar with, intercompany accounts. If you have questions about intercompany accounts and using A/R and expense accounts for intercompany account transactions, discuss these matters with your accountant.
Total of all Accounts Allocations
Multiple Profit Center Allocations
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