Allocating Account Dollars Version

Contents

Overview

An allocation is a formula or algorithm that establishes how dollars from one or more accounts are redistributed to other accounts.

Allocations can be made for any period in the current fiscal year or prior year.
Note: Allocations can be run for the current year without closing the prior year.

You can set up allocations that redistribute period activity, account balance for a period, or a specific dollar amount. The application computes allocation amounts using two methods: the fixed method and the ratio method. You may select the method for any allocation that you create.

• Fixed –The portion of the base amount distributed to the individual "to" accounts is either a fixed percentage or a fixed dollar amount.
• Ratio – The portion of the base amount distributed to the individual "to" accounts is calculated by using a ratio of account dollar balances or other statistical information (such as labor hours or occupancy).

The resulting allocation amounts are then posted to accounts.

Allocations can only be processed as part of an allocation group. Each allocation in the group is processed sequentially according to its order in the group. Allocations can be processed for any period in the current fiscal year, and can be processed multiple times in the same period. Processing an allocation produces a journal voucher that is posted automatically to the General Ledger.

Creating Allocation Groups

An allocation group is a collection of allocations that are processed together. Each allocation that you create must be assigned to a group.

To create an allocation group:

1. From the General Ledger main Contents, click Allocation Management > Allocation Groups.
   The Allocation Groups list appears (Figure 1)

Figure 1 - Allocation Groups List

2. Click New.
   The New Allocation Group panel appears (Figure 2).

Figure 2 - New Allocation Group Panel

3. Enter a description for the new allocation group. The application assigns the group number.
4. Click Save.
5. Click Submit.
   The application returns to the Allocation Groups list.
   - Click Refresh to see the new group listed.

Creating a New Allocation

Below are general steps in accessing the panels that create new allocations.

Creating an allocation first involves completing the Allocation Header panel, in which you specify the allocation method, the basis for allocation, and other parameters. Be sure to read the details of using the fixed and ratio allocation methods.

The second part of creating an allocation involves specifying the account(s) that dollars are deducted from and allocated to. You may also need to specify ratio accounts, as well, depending on the allocation method that you chose. (The system uses ratio accounts with the ratio method.)

To enter header information for a new allocation:

1. From the General Ledger main Contents, click Allocation Management > Allocations.
   The Allocations list appears (Figure 3).

Figure 3 - Allocations List

2. Click New.
   The New Allocation header panel appears (Figure 4).

Figure 4 - New Allocation Header Panel

3. Enter information on the header panel fields.

• Values that you select for the Allocation Method and the Allocation Basis are related, as outlined below. You should also read the detailed discussion in the sections Using the Fixed Method to Create Allocations and Using the Ratio Method to Create Allocations..

Allocation Method
The method of distribution used in the allocation.

Select the allocation method: fixed or ratio.

• Fixed – The portion of the base amount distributed to the individual accounts is either a fixed percentage of the base or a fixed dollar amount.
• Ratio – The portion of the base amount distributed to the individual accounts is calculated.
by using a ratio of account dollar balances or other statistical information, such as labor hours or occupancy.

When you use ratio allocations, you specify...
- One or more "from" accounts (from which the base amount is calculated),
- One or more "to" accounts (to which the individual amounts are disbursed), and
- One or more "ratio" accounts (accounts used to calculate the ratio. The ratio, in turn, is used to calculate the individual amounts.)

The "ratio" accounts and the "to" accounts are associated, based on the accounts' organization and department segments. The location of the organization and Department segments within the account code depends on the structure of accounts at your site. Each organization/department pair represented in the listing of "ratio" accounts must exist in the listing of "to" accounts.

Allocation Basis
Identifies the type of amount used as the basis for determining "from" account dollars.
Options are:

Period Activity
The net of the amounts posted to the selected accounts for the period for which the allocation is being run. The net amount is calculated as debit amounts minus credit amounts. Unposted journal vouchers in the selected processing period and year are not included in the allocation calculations.

•To calculate the Total Allocation Amount based on Period Activity:
- Sum the Period Activity for all the "from" accounts to get the Allocation Amount for the selected processing period and year.
- Multiply the Allocation Amount by the Allocation Percent to get the Total Allocation Amount.

Account Balance
The sum total amount in the accounts at the end of the period for which the allocation is being run. Unposted journal vouchers in the selected processing period and year are not included in the allocation calculations.

• To calculate the Total Allocation Amount based on Account Balance:
- Sum the Account Balances for all the "from" accounts to get the Allocation Amount for the selected processing period and year.
- Multiply the Allocation Amount by the Allocation Percent to get the Total Allocation Amount.

Specific Amount
A fixed dollar amount entered by the user.

• To calculate the Total Allocation Amount based on Specific Amount:
The Total Allocation Amount is equal to the Specific Amount.

Allocation Ratio Basis
The type of amount used as the basis for calculating allocation ratios.
Required for the ratio method. Options are:

Period Activity - The net of the amounts posted to the selected accounts for the period for which the allocation is being run. The net amount is calculated as debit amounts minus credit amounts. Unposted journal vouchers in the selected processing period and year are not included when the allocation calculations are performed.

Account Balance - The sum total amount in the accounts at the end of the period for which the allocation is being run. Unposted journal vouchers in the selected processing period and year are not included when the allocation calculations are performed.

Not Applicable appears in this field when you select the fixed Allocation Method.

Click Help for information on other fields.

4. Click Save to save the information.
   
5. Click Submit when you are finished.
   The Fixed Allocation or the Ratio Allocation edit panel appears, depending on which method you selected.
   See one of the following sections Using the Fixed Method to Create Allocations or Using the Ratio Method to Create Allocations.

Using the Fixed Method to Create Allocations

The fixed method allocates a fixed amount — or a fixed percentage of a base amount — to accounts. See the detailed example of an allocation using the fixed method before you set up your first fixed allocation.

With the fixed method, after you enter header information for an allocation, the Fixed Allocation panel appears (Figure 5). This panel contains information from the allocation header that you created, and fields for entering "from" and "to" accounts.

.

Figure 5 - Edit Panel for a Fixed Allocation: Allocation Tab

The General tab contains the header information that you entered previously. The allocation in Figures 5, 6, and 7 is a fixed allocation with an Allocation Basis of Period Activity and an Allocation Percent of 10%.

Notice that since an Allocation Percent is specified, a Specific Amount to Allocate cannot be entered.

You could enter a value in Specific Amount to Not Allocate. The Specific Amount to Not Allocate is deducted from the calculated total amount allocated to the "to" accounts. The Specific Amount to Not Allocate is the minimum amount that must remain in the "from" account.

To set up a fixed allocation:

When you Submit the header for a new (or edited) fixed allocation, the Fixed Allocation panel appears. See Figure 5 above.

1. Select the From Accounts tab to specify the account(s) that you are allocating dollars from. See Figure 6. As you enter and Save accounts, the system adds them to the list in the Preview window.

Figure 6 - Edit Panel for a Fixed Allocation: From Accounts Panel

Figure 6 shows an account entered as the "From Account:" 001-100-11-0150. Dollars are allocated from this account to the account(s) specified on the To Accounts tab. You can enter one, or multiple "From Accounts."

2. Enter the account segments for each account in the appropriate fields, or, use an account mask to specify multiple accounts.
3. Click Save.
   - Account information appears in the Preview window.
4. Select the To Accounts tab to specify the accounts that you are allocating dollars to. See Figure 7.

Figure 7 - Edit Panel for a Fixed Allocation: To Accounts Panel

5. On the To Accounts tab, enter the Account Code for the first account to which you are allocating dollars.
   You can allocate dollars to multiple accounts.

• Enter the account segments for each account in the appropriate fields, or, use an account mask to specify multiple accounts.
• Click Save. The account appears on the bottom of the panel under Allocate to Accounts.
  

6. If needed, click the Alternate Offset tab and enter an Alternate Offset Account Code. When you specify an Alternate Offset Account, the Total Allocation Amount is distributed in its entirety to the account. The allocation amounts are not posted to the individual "to" accounts.
   
   
7. Enter either an Allocation Amount or an Allocation Percent.

• An Allocation Amount is a set dollar amount being allocated to the "to" account.
• An Allocation Percent is the percentage of the Total Allocation Amount assigned to the "to" account. (The Total Allocation Amount is calculated from the "from" account(s), depending on the Allocation Basis that you specified. See the discussion of each Allocation Basis for a summary of how the Total Allocation Amount is calculated.)

8. Click Save periodically to save your information.
9. When you are finished, click Submit to create the allocation.
   If there are no errors, the allocation is created. To process the allocation, you need to work with the allocation group that it belongs to. See Completing and Processing Allocation Groups.

Using the Ratio Method to Create Allocations

In a ratio allocation, the amount distributed to the "to" accounts is calculated based on a ratio. When you use ratio allocations, you use the Ratio Allocation panel (Figure 8, below) to specify...

• One or more "from" accounts (from which the base amount is calculated),
• One or more "to" accounts (to which the individual amounts are disbursed), and
• One or more "ratio" accounts (used to compute the ratio(s). Each ratio, in turn, is used to calculate the individual amounts.)

The "ratio" accounts and the "to" accounts are associated, based on the accounts' organization and department segments. The location of the organization and department segments within the account code depends on the structure of accounts at your site.

Each organization/department pair represented in the listing of "ratio" accounts must exist in the listing of "to" accounts.

To calculate the ratio

• Identify "ratio" accounts (which parallel the "to" account codes' organization and department segments).
• Sum the Period Activity or Account Balance amounts for all the "ratio" accounts to get a Ratio Total for the selected processing period and year. Whether the Period Activity or Account Balance is used in this portion of the calculation depends on the Allocation Ratio Basis specified.

For each "ratio" account, divide the Ratio Total by that account's Period Activity or Account Balance (according to the Allocation Ratio Basis). The resulting value is the ratio for the accounts' organization/department.

To calculate the Individual Allocation Amounts

• Each "from" account contributes the amount determined by the value of the Allocation Basis and the Allocation Percent.
• Each "to" account receives an amount computed by multiplying its corresponding ratio and the calculated Total Allocation Amount.

Scenario for a ratio allocation: Training Expenses

The following scenario is used in subsequent discussion of ratio allocations.

An organization needs to allocate funds from its Training Expense accounts to its Travel and Living accounts. Travel and Living accounts are used for staff who attend out-of-town conferences and seminars. The organization allocates Travel and Living funds proportional to the amounts spent on conference fees for each department, which are in the Conference Fees accounts.

Here are the accounts to be used in the allocation:

Allocation Accounts

To set up a ratio allocation:

1. Follow the steps described above to create a header for the allocation.
   
   For the "Training Expenses" scenario, information for the Allocation Header panel fields is:

   Sample Ratio Allocation Header Fields

   Allocation Method: Ratio

   Allocation Basis: Account Balance

   Allocation Ratio Basis: Account Balance

   Allocation Percent: 30

   Allocation Group: 66

When you Submit the header for a new (or edited) ratio allocation, the Ratio Allocation panel appears. (Figure 8).

Recall that the Allocation Basis is the type of amount used to calculate the "from" dollars. The Allocation Ratio Basis is the type of amount in the ratio accounts used to calculate the ratio. In this example, 30% — the Allocation Percent — of the total allocation amount is to be allocated.

Figure 8 - Edit Panel for a Ratio Allocation: Allocation Tab

2. Select the From Accounts tab to specify the account(s) that you are allocating dollars from. See Figure 9.
   As you enter and Save accounts, the system adds them to the list in the Preview window.

Figure 9 - Edit Panel for a Ratio Allocation: From Accounts Panel

• Enter the account segments for each account in the appropriate fields. (Click Save after entering each account.) Or, use an account mask to specify multiple accounts.
• If needed, enter an Alternate Offset Account Code. When you specify an alternate offset account, the total allocation amount is distributed in its entirety to the account. The allocation amounts are not posted to the individual "to" accounts.
• Click Save.
  Account information appears in the Preview window.

3. Select the To Accounts tab to specify the accounts that you are allocating dollars to. See Figure 10.

Figure 10 - Edit Panel for a Ratio Allocation: To Accounts Panel

4. On the To Accounts tab, enter the segments for each Account Code to which you are allocating dollars, or, specify the account segments using an account mask.
   
5. Click Save. Each account appears on the bottom of the panel.
6. When you are finished entering "to" accounts, select the Ratio Accounts tab (Figure 11) to enter ratio accounts. The ratio accounts are used to compute a ratio for calculating each "to" account's allocation.

Figure 11 - Edit Panel for a Ratio Allocation: Ratio Accounts Panel

7. Enter the account segments for each account in the appropriate fields, or, use an account mask to specify multiple accounts.
8. Periodically, click Save to save the information you enter.
9. When you are finished, click Finish Now. If you have more work to do, click Finish Later.
   

The next step is to complete and process the allocation group that the allocation belongs to.

Completing and Processing Allocation Groups

Allocations are assigned to allocation groups, and it is allocation groups — which may contain one or many allocations — that the system processes. When an allocation group is processed, the system generates and posts the journal vouchers that distribute the allocated dollars. Before you can process an allocation group, you must complete it.

To complete an allocation group:

1. From the General Ledger main Contents, click Allocation Management > Allocation Groups.
   - The Allocation Groups list appears (Figure 1).
2. Next to the allocation group that you wish to complete, click W or select Menu > Work with.
   - The Work With Allocation Group panel appears (Figure 12). Figure 12 shows the allocation group for the "Training Expenses" allocation created above. (The allocation is the only allocation in the group.)

Figure 12 - Work With Panel for an Allocation Group

3. Select Complete this Group.
4. Click Go.
   - A panel appears asking you to confirm that you wish to complete the group.
5. Click Submit.
   - The system completes the allocation group.
6. Click Back to return to Allocation Groups list.
7. Click Refresh.
   - If there are no errors, the status of the allocation group is changed to Complete. The allocation group can now be processed.

To process an allocation group:

1. From the General Ledger main Contents, click Allocation Management > Allocation Groups.
   - The Allocation Groups list appears (Figure 1).
2. Next to the allocation group that you wish to complete, click W or select Menu > Work with.
   - The Work With Allocation Group panel appears (Figure 13). The Process this Group function is available on the panel.

Figure 13 - Process an Allocation Group

3. Select Process this Group.
4. Click Go.
   A panel appears asking you to confirm that you wish to process the allocation group, and for which period and year. (Figure 14).

Figure 14 - Confirm Allocation Group Processing

5. Enter the period (Processing Period) and year (Processing Year) for which you wish to make the allocations set up in the allocations group. For the "Training Expenses" example, the Processing Year is 2004 and the Processing Period is 12 (Figure 14)
   - In order to process an allocation group, you must have the appropriate authorizations to create journal vouchers for the period and year that you enter. This authorization is specified in your user profile.
   - Also, the Processing Period and Processing Year that you specify must match the balance sheet current period and year.
   
6. Click Submit.
   The system processes the allocation group.
7. Click Back or the appropriate tab (if you are using Internet Explorer tabs) to return to Allocation Groups list.
8. Click Refresh.
   If there are no errors, the status of the allocation group is changed to Complete. The allocated amounts are calculated, and journal vouchers are created and posted.

For the "Training Expenses" scenario, dollars are allocated to accounts as follows:

More information is available:

• Details on the "Travel Expenses" scenario showing calculations.
• A different example of a ratio allocation.

To view a journal voucher created for an allocation:

1. From the General Ledger main Contents, select Account Management > GL Accounts.
   - The list of General Ledger accounts appears.
2. Locate the account of interest.
3. Next to the account, select Menu > View Journal Entries.
   A list appears for the account showing journal entries (or No Data appears if the account has had no postings).
   - You can enter a different year for the account in the Year box, and click Go to get information for a different year and period.

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