Examples of Cross-Ledger Allocations
You can process cross-ledger allocations by choosing to create them as general ledger journals or intercompany transactions. Choose to generate journals from an allocation rule or rule set by submitting the Generate General Ledger Allocations process.
This process provides options to balance any cross-ledger journal with a receivables or payables line.
You can also choose to create intercompany transactions from an allocation rule or rule set by submitting the Generate Intercompany Allocations process. This creates intercompany transactions that optionally can be routed to Receivables for invoice generation.
The following scenario illustrates generating balancing journal entries as well as intercompany transactions for cross-ledger allocations.
Intercompany Allocation Entries
At month end the accountant allocates a portion of any centrally incurred expenses across all organization units that contribute to, or benefit from, that expenditure, based upon a calculation that represents a reasonable allocation of how that expense should be split. By doing this allocation, the Income Statement or Profit and Loss statement for each of those organization units shows a fair representation of its share of operational costs.
In many cases, allocations only take place between departments within one subsidiary, but there may be other costs that are shared between subsidiaries on a regular basis.
For example, marketing expense is incurred within a central corporate ledger, and is allocated to the United States (US), Canadian (CA), and United Kingdom (UK) organizations based on sales volume. These organizations are separate legal entities with their own separate ledgers. The US organization bears 50% of the cost and the CA and UK organizations each bear 25% of the cost.
The Marketing Costs allocation rule is set up to generate the allocation lines listed in the following table.
|
Ledger |
Account |
Debit |
Credit |
Description |
|---|---|---|---|---|
|
InFusion USA |
3111-110-0000-41110-0000 |
USD 500 |
Allocation Line |
|
|
InFusion UK |
3411-000-0000-52330-0000 |
USD 250 |
Allocation Line |
|
|
InFusion Canada |
3511-120-0000-52330-0000 |
USD 250 |
Allocation Line |
The intercompany balancing rules are set up to use the following accounts.
-
Receivables Account: 3000-000-0000-13011-0000
-
Payables Account: 3000-000-0000-21081-0000
Generate General Ledger Allocations Using Intercompany Accounts
Submit the Generate General Ledger Allocations process and choose your Rule or Rule Set. Select Process Cross-Ledger Allocations and Use Intercompany Accounts options to use intercompany balancing rules to generate the receivables and payables accounts required to balance cross-ledger allocation journal lines.
The following journals are created for the Marketing Costs allocation rule.
The following table described the InFusion USA journal after cross-ledger balancing:
|
Ledger |
Account |
Debit |
Credit |
Description |
|---|---|---|---|---|
|
InFusion USA |
3111-110-0000-41110-0000 |
USD 500 |
Allocation Line |
|
|
InFusion USA |
3111-110-0000-13011-3411 |
USD 250 |
Cross-Ledger Intercompany Allocation with Ledger InFusion UK |
|
|
InFusion USA |
3111-110-0000-13011-3511 |
USD 250 |
Cross-Ledger Intercompany Allocation with Ledger InFusion Canada |
The following table described the InFusion UK journal after cross-ledger balancing:
|
Ledger |
Account |
Debit |
Credit |
Description |
|---|---|---|---|---|
|
InFusion UK |
3411-000-0000-52330-0000 |
USD 250 |
Allocation Line |
|
|
InFusion UK |
3411-000-0000-21081-3111 |
USD 250 |
Cross-Ledger Intercompany Allocation with Ledger InFusion USA |
The following table described the InFusion Canada journal after cross-ledger balancing:
|
Ledger |
Account |
Debit |
Credit |
Description |
|---|---|---|---|---|
|
InFusion Canada |
3511-120-0000-52330-0000 |
USD 250 |
Allocation Line |
|
|
InFusion Canada |
3511-120-0000-21081-3111 |
USD 250 |
Cross-Ledger Intercompany Allocation with Ledger InFusion USA |
Generate Intercompany Allocations
Submit the Generate Intercompany Allocations process to create intercompany transactions. If you need invoices for your allocations choose an intercompany transaction type that requires invoicing so the intercompany transactions get routed to Receivables for invoice generation.
Ledger, Legal Entity, and Primary Balancing Segment assignments are set up as shown in the following table:
|
Ledger |
Legal Entity |
Primary Balancing Segment |
|---|---|---|
|
InFusion USA |
USA Corp |
3111 |
|
InFusion UK |
UK Corp |
3411 |
|
InFusion Canada |
Canada Corp |
3511 |
Intercompany organizations are set up as listed in the following table.
|
Intercompany Organization |
Legal Entity |
|---|---|
|
USA Sales |
USA Corp |
|
UK Sales |
UK Corp |
|
Canada Sales |
Canada Corp |
The following table lists the provider intercompany transactions that are created for the Marketing Costs allocation rule.
Batch 101:
|
Provider |
Transaction Number |
Distribution Number |
Distribution account |
Debit |
Credit |
|---|---|---|---|---|---|
|
USA Sales |
1 |
1 |
3111-110-0000-41110-0000 |
USD 250 |
|
|
2 |
3111-110-0000-13011-3411 |
USD 250 |
|||
|
2 |
1 |
3111-110-0000-41110-0000 |
USD 250 |
||
|
2 |
3111-110-0000-13011-3511 |
USD 250 |
The following table lists the receiver intercompany transactions that are created for the Marketing Costs allocation rule.
|
Receiver |
Transaction Number |
Distribution Number |
Distribution account |
Debit |
Credit |
|---|---|---|---|---|---|
|
UK Sales |
1 |
1 |
3411-000-0000-52330-0000 |
USD 250 |
|
|
2 |
3411-000-0000-21081-3111 |
USD 250 |
|||
|
Canada Sales |
2 |
1 |
3511-120-0000-52330-0000 |
USD 250 |
|
|
2 |
3511-120-0000-21081-3111 |
USD 250 |