Define Allocation Rules to Allocate Rent Costs from General Ledger
This example demonstrates how to set up allocation rules to allocate rent costs.
Your enterprise has an organization that rents building space, and the finance department wants to allocate rental cost to the projects owned by the organization. The project managers can then use the allocation to bill costs to customers. The Payables department charges rent to a different general ledger account for each organization by cost center. You implement the allocation rule for the organization. Allocate 100 percent of the rental cost collected in the general ledger to all eligible tasks for San Diego organization projects once a month. You can prorate the allocation based on the previous month's total raw cost for each task. Project Vision Software Install is performed completely at the customer location and should not be allocated any rent costs. This project must be excluded from receiving rent allocation.
You are implementing allocation rules for the organization. You want to allocate 100 percent of the rental cost collected in the general ledger account for the organization to all eligible tasks once a month. You also want to prorate the allocation based on the previous month's total raw cost for each task. The following table summarizes key decisions for this scenario:
Decisions to Consider |
In this Example |
---|---|
How to allocate the costs? |
Allocate to all eligible tasks and prorate the allocation by the total actual raw cost accrued for each task during the prior accounting period. |
When to allocate costs? |
Allocate rental costs once each accounting period. |
What costs to allocate? |
Allocate 100 percent of rental costs collected in the accounting period for the cost center. |
You define the allocation rule in this scenario to distribute amounts between and within projects and tasks in a business unit. This allocation rule defines the following:
-
Source of the amounts to allocate
-
Target projects and tasks to receive the allocation
-
Method to generate offset transactions, if required
-
Method to divide the source amount among the target projects and tasks
-
Attributes for the allocation and offset transactions, including the expenditure type, expenditure organization, and expenditure type class for the resulting expenditure items
Defining the Allocation Rule
-
On the Project Costs work area, click Manage Allocation Rules in the Tasks pane.
-
Click Create to open the Create Allocation Rule page.
-
Complete the general details to define the allocation rule for the following key fields as shown in the table.
Field
Value
Business Unit
InVision Services
Name
San Diego Rent Allocation
Description
Rule to allocate San Diego rental costs to projects
Allocation Method
Full
Allocation Period Type
Accounting Period
Targets Selection
Within business unit
Basis Method
Prorate
Expenditure Organization
San Diego
Expenditure Type Class
Miscellaneous Transaction
Expenditure Type
Rent Allocation
Defining Allocation Sources
-
Click Sources and then Ledger Sources and complete the key fields as shown in the table.
Field
Value
Allocation Pool Percentage
100
Source Amount Class
Period-to-date
Ledger Sources Account
01-420-7580-000
Percentage
100
Subtract
Leave unchecked
Defining Allocation Targets
-
Click Targets and complete the key fields as shown in the table.
Field
Value
Line Number
1
Project Organization
San Diego
Line Number
2
Project
Vision Software Install
Exclude
Select the check box.
Defining Allocation Offsets
-
Click Offsets and complete the key fields as shown in the table.
Field
Value
Offset Method
Specific project and task
Project
Allocation Offset Project
Task
1.0
Expenditure Organization
San Diego
Expenditure Type Class
Miscellaneous Transaction
Expenditure Type
Rent Allocation
Defining Allocation Basis Details
-
Click Basis and complete the key fields as shown in the table.
Field
Value
Basis Category
Actual Amounts
Amount Type
Total Raw Cost
Amount Class
Period-to-date
Relative Period
-1
-
Click Save and Close.