The process begins with a user or a team lead creating an allocation request, specifying the details of the general journal that needs to be generated. This includes essential information such as the accounting period, account codes, amounts, and any other relevant transaction details.
Once the request is created, it goes through a review and approval process. During this stage, stakeholders, such as financial controllers or managers, assess the accuracy and validity of the journal entries to ensure they comply with company policies and accounting standards.
After approval, the allocated tasks are automatically assigned to appropriate resources, such as accountants or financial analysts, based on predefined rules and resource availability. This step ensures that the journal entries are accurately posted to the general ledger.
Upon allocation, the journal entries are posted to the general ledger, updating the financial records and ensuring that the financial statements reflect the correct transactions and account balances.
Part one: A brief overview of a ledger allocation rule and its components.
1. Autogenerated based on the allocation rule number sequence.
2. Populated by the user. Should clearly define the purpose of the allocation rule.
3. Can be left blank. Determines when the rule should expire.
4. When the rule should begin. Can be left blank as well.
5. When the allocation rule was last run, this system populated to reduce the chance a rule gets applied more than it is supposed to.
6. Options: Basis: This variable method is used when the allocation depends on the actual ledger balance, based on filter criteria. For example, advertising expenses can be allocated based on each department’s sales in proportion to the total departmental sales.
a. Fixed weight and percentage: In these methods, the allocation percentage or weight is directly defined for the rule. For instance, advertising expenses can be allocated using fixed weights, where Department A receives 70 percent of the advertising expense and Department B receives 30 percent.
b. Equally: Distributes the amount evenly among each defined destination. For instance, if Department A and Department B are the designated destinations, advertising expenses can be allocated so that both Department A and Department B receive an equal share of 50 percent each from the total advertising expense.
7. Intercompany would be if these allocations are moving across legal entities, we can ignore this as it will always be “No”.
8. Allocation journal name will always be “Alloc”. This defines the voucher for audit/tracing purposes.
9. Populated by the description of the journal name.
10. Ledger or fixed value.
11. Multiply or divide. Determines the mathematical manipulation of the data.
12. IMPORTANT: If you selected “Ledger” in the data source field, you need to select a date interval to determine the accounting period that is used for the allocation rule source.
a. This is very important to select, if we want to allocate an amount monthly then the date interval code should be selected as “Current Month” so that system considers only the current month’s “Closing” without considering the opening balance.
Part two: Running the process allocation rule
Validate that there is source data in the trial balance
Trust me when I tell you the financial dimensions are the same!
Now that we know there is source data in the account string we want to allocate, we can navigate to General Ledger > Allocations > Process allocation request.
1. Select the allocation rule to be processed.
2. When the allocation rule was last run, it can be useful to ensure no one is running it when they are not supposed to.
3. Date till which source amount should be considered. If we are running this as a period close process, we would want to consider all of April.
4. ALWAYS USE PROPOSAL ONLY. Post only will create and post, we want to review the journal entry to ensure it is correct.
5. The date the journal should be posted.
Looks like we got what we wanted!!
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