Ledger allocations in Microsoft Dynamics 365 Finance and Operations one version

Ledger allocations in Microsoft Dynamics 365 Finance and Operations one version

Allocation is an important process which helps in distributing monetary amounts from on head to other heads.

This could span distributing from one account to other account or to same account in different financial dimension combinations or other account in different dimensions.

Typically done at month end before key financial reports are finalized e.g. profit and loss and Balance sheet.

Allocations also allows to allocate across multiple companies, also known as Intercompany allocations.

Configuration of ledger allocation in D365FO involves

• Ledger allocation rules
  • This allows to define the results to be distributed.
• Ledger allocation journals
  • Defined in general ledger - journal names of journal type=Allocation
• Ledger allocation rule setup
  • Destination option
    • Source account or user defined
      • If need to keep source and destination account as same then used option as 'source account'
      • If need to allocate from one account to other than chose user defined and then define the account in the destination options
    • Get financial dimensions from source or user defined
      • If changing financial dimension heads on same account (e.g. distributing a generic expense over departments) then user define financial dimension is used
      • If dimensions are not be changed rather just account monetary movement is happening then keep the option as 'source'
  • Activating a ledger allocation rule
  • Provide effectivity dates for allocation rule
  • Default Offset account and financial dimension at rule level
  • Assign the method of allocation
    • System behind the scene uses percentages to allocate source to destination
  • Define the heads of movement in source and destination setting
    • Specific source or generic using wildcards to provide a ledger account (account and financial dimensions)
    • Under destination can specify
  • Define allocation methods to arrive at percentage to allocate/distribute
    • Fixed percentage:
      • This uses a user defined fixed percentage which is specified in destination lines.
      • The total of all percentage must be 100%
    • Fixed weight:
      • This also would convert to a percentage figure at the end but uses fixed weight to calculate percentages.
      • Commonly used for distributing cost based on headcount
    • Spread even:
      • This does even distribution to all destination lines.

Below is a ledger Allocation proposal from same account which had an advertising expense recorder earlier and now the allocation is evenly spready amongst departments

• Basis:
  • This is a special option to arrive ate distribution percentage not by the user rather the system to calculate based on a particular factor.
  • Common example is distribution of expenses amongst departments basis the revenue generated by the department or any other financial dimension.

This basis allocation method requires setting up ledger allocation basis rules to leverage in the destination lines

One can create a number of basis rules to be used in a common allocation rule

An example is shown below wherein amount posted to expense account 601300 is distributed business units according to their contribution in sales.

Once the core configuration of ledger allocation is setup, you are ready to execute allocation.

This can be done either by running Process allocation request routine or triggering the same from an allocation journal as shown below.

There are two options of generation, directly post (less recommended initially until the allocation is all validated) and other option is to generate a proposal in allocation journal which the user could review and post manually.

Note:* Be careful of not running allocation over an earlier execution as it would create additional allocation entries based on your source selection if not is specific.

Happy D365FO