Allocation Accounts might be the answer when expenses posted throughout the month need to be allocated across multiple dimension values. The first use that comes to my mind is for distributing overhead expenses to multiple dimensions from the purchase line, for example, insurance, utilities, rent, office supplies, etc.
Even if you are using recurring purchase lines with percentages on each line to handle this now (not a bad solution), Allocation Accounts may be The Righter Way for you.
Setting up Allocation Accounts is easy
Go to Allocation Accounts, select New and assign an intuitive name to the account. Here is use OVERHEAD since this account helps me allocate an overhead expense across different dimensions more easily.
Select Inherit from Parent as the account type to allocate to different dimensions while retaining the G/L Account entered on the purchase line.
Assign a percentage to your first allocation by dimension.
Go to Line menu, select Dimensions and assign the dimension for the first percentage in the allocation.
For each additional line (until the total percentage = 100%), select the account type. From the percentage field (without updating the percentage yet), go to the Line menu to select the dimension for this line’s allocation. Back at the Allocation line, now you can update the percentage on the line. I find I need to do these steps in just this order (at least at the time of writing this post), or I get a validation error and am required to refresh my page.
Once the total of the allocation lines sums to 100%, you are ready to use the allocation account in transactions.
Allocation Account in Transactions
If Allocation Account column is not visible on your purchase lines, personalize to add this column.
On the Purchase line, enter all the information as you would typically do, including selecting values for multiple dimensions on the line.
On the line, select the Allocation Account. You can use multiple Allocation Accounts in any given transaction by selecting different codes on each of the purchase lines.
Preview Posting to validate results prior to posting.
I tested using Allocation Accounts in conjunction with Deferral Template Codes, and it works great for subscriptions and other expenses that are paid annually and deferred for expense recognition.
Allocation Accounts vs. Recurring Purchase Lines
Both of these tools will streamline work and reduce errors for allocation of expenses, especially for dimensions. Prior to the addition of Allocation Accounts, Recurring Purchase Lines was our only proactive option at the time of posting the purchase documents vs. waiting for month end to reallocate.
Allocation Accounts are very powerful and may not only replace the use of recurring purchase lines for expense allocation on purchase documents but may also eliminate the need for month end reallocations for dimensions in some organizations.
