To allocate overhead expenses to cost centers based on the Sq. ft.

, which was initially booked as

an invoice in AP module.

Business Case:
Accounting department required to allocate the rent expense to the cost centers based on some
criteria in the system and it should be auto-allocated every time when the expense invoice
booked, accounted and post in GL.

For instance, if a company incurred rent expense USD 175,217.40 in the May-17 period and as
per company procedures, this should be allocated to different departments on Sq. Ft basis and
charged against their budget.

So the calculation would be:

Rent Expense: USD 175,217.40

Company Total area: 50,000 Sq. Ft.

Department "Facilities Resources" area: 5,000 Sq. Ft.

Department "West Region Resources" area: 6,000 Sq. Ft.

Department "East Region Resources" area: 15,000 Sq. Ft.

Department "Machine Resources" area: 4,000 Sq. Ft.

Department "Computer Resources" area: 12,000 Sq. Ft.

Department "Communications Resources" area: 8,000 Sq. Ft.

So Facilities Resources department rent expense will be: USD 17,521.74 ((USD 175,217.40 ÷
50,000) X 5,000)), for West Region Resources department will be USD 21,026.088 and same
formula will be applied to other remaining departments.

Prerequisites:
Before doing the setup, you need to identify the GL account code of the Rent Expense.

In my example, it is 01.000.7420.0000.000, the 3rd segment representing natural account which

is Rent expense account; and 2nd segment represents cost center.

Also, need to make sure the Parent and child hierarchy is defined for the cost centers.
Account balance of May-17 of the above account and this should be allocated as per
aforementioned formula.
Setup:
First off, we will post the Sq. Ft details in the GL:

Select "STAT" as a currency and cost centers GL codes, then post it - This will be a one-off
activity.
Now navigate to General Ledger Responsibility -> Journals -> Define -> Allocation

Define Batch name, Balance Type should be Actual, then click on "Formulas" button

Here we define the formula:

a. Name the Formula

b. Select Journal Category

c. Select functional currency

d. Select currency allocation "Converted Amount" as this will take the complete balance of the
GL account instead of "Calculated Amount" which consider foreign currencies exchange rates on
the effective date.

e. "A" represents total expense, in our case, it is USD 175,217.40, so we need to select
01.000.7420.0000.000 and type should be "C" constant, currency type "Entered" and currency
"USD".

f. "B" represents the usage factor of the departments. Here we need to make sure that we should
select only parent value of the cost center, and type should be "L" looping, subsequently, the
system will automatically pick the child values.

e. "C" represents the total area of the company, which is 50,000 Sq. ft. Here we need to make
sure that we should select only parent value of the cost center, and type should be "S" summing,
subsequently, the system will automatically add up the amount of each cost center.

d. "T" represents the target account, which is a Debit account, and it will be the same account as
we have given in "B".

e. "O" represents the offset account, which is a Credit account and it will be the same account as
we have given in "A".
Transactions:
Now go back to the main allocation window, validate and after successful validation, press
"Generate" and also you need to schedule it so that next time it will allocate automatically.
View the program Run MassAllocations output to check if system really allocated successfully
or not

Now you review the journal to see how the system calculated the amount:
System successfully and accurately allocated the rent expense to the cost centers, you may now
post it and run the financial reports.