02 - Creating a Cost Allocation

A Cost Allocation (CA) distributes expenses across products, departments, or cost centers. In the Inventory App, you can define allocations by percentage or amount to ensure accurate expense tracking and financial reporting.

Purpose of Cost Allocation

• Spread expenses fairly across products or business units.

• Match costs to the activities that generate them.

• Improve profitability insights at a granular level.

• Maintain a transparent audit trail of allocations.

Step 1: Create a New Cost Allocation

1. Open the Cost Allocation tab and click New.

2. Fill in the following details:

   • Entity – Select the business entity for which the allocation is being created.

   • Date – The date of allocation entry.

   • Goods Receive (if applicable) – Link to a Goods Receipt if allocation is tied to received items.

   • General Ledger Account – Choose the source account (e.g., GR/IR Clearing).

   • Amount to Allocate – Enter the total cost amount to be distributed.

   • CA No – Auto-generated or manually assigned.

   • Description – Add notes for reference.

Step 2: Add Allocation Lines

1. Under Cost Allocation Lines, click Add New Line.

2. For each line, enter:

   • Cost – The expense category or ledger account being allocated.

   • Product / Cost Center – The item, department, or project receiving the cost share.

   • Percent Allocation – Percentage share of the total cost.

   • Amount – Auto-calculated based on percentage (can also be entered directly).

3. Add as many lines as needed until the full amount is allocated.

Step 3: Save and Post the Allocation

• Save the allocation as Draft if you want to review later.

• Once verified, set the status to Posted.

• The system will update the ledger balances and reflect the allocation in financial reports.

Step 4: Reviewing Allocations

• View the allocation history in the History tab.

• Check linked Products or Cost Centers to see allocated amounts.

• Use the Reports section for summaries of allocations by period, cost type, or department.

Best Practices

• Ensure allocations always total 100% of the defined amount.

• Use consistent allocation rules (e.g., by headcount, square footage, revenue) for fairness.

• Document allocation bases in the Description field for audit clarity.

• Regularly review posted allocations to validate accuracy.

You can also perform the following actions on existing Cost Allocation records:

Edit Cost Allocation
Go to Cost Allocation, select a cost allocation, click Edit, update the details, then click Save.

Delete Cost Allocation
Select Cost Allocation(s), click Delete Selected or open a Cost Allocation and click Delete.

Attach Files
Open a Cost Allocation, go to Notes & Attachments, click Upload Files or drag and drop. Manage files as needed.