Allocation and Accrual entries

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Hi everyone,

I have some questions about Allocation and Accrual entries in AX 2012.

As my understanding, Allocation rules is for allocation from 1 indirect expense into each department (for example: Monthly electricity expense: In Jan, i record 1 invoice for monthly expense: Dr Electricity expense - Cost center 100, Cr: AP ---> at the month end, i will allocate the electricity expense into each department: Dr Electricity expense - Cost center 150, Cr: Electricity expense - Cost center 100).

And Accrual scheme is to record the monthly expense against prepaid account (for example, In Jan, i record 1 invoice for 3-month rental --> Dr: Prepaid Account, Cr: AP; at the month end, i will use Accrual to record the rental fee for this month --> Dr: Monthly rental expense, Cr: Prepaid Account).

1/ Does anyone help to confirm my understanding?

2/ If my understanding is correct, the 2nd question is: the auditing expense need to be recorded every month, but i only receive the invoice from Vendor at the end of year. Can i also use Accrual scheme for this case? If not, is there any suggestion for that?

Thank you very much!

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Ludwig Reinhard Microsoft Employee on at

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Hi Thu Ngo,

Your understanding is correct :-) and you are right that are using accruals schemes if you receive an invoice for auditing expense that you want to accrue to different periods.

Best regards,

Ludwig

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Community Member on at

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Hi Ludwig,

Thank you so much for your reply, i assume this method goes the same for revenue.

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Ludwig Reinhard Microsoft Employee on at

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Hi Thu Ngo,

For revenue things might be different unless you record your revenue through journals.

What is your requirement in regards to revenue and where is the revenue generated (SO invoices, Project invoices, Free text invoices, etc.)

Best regards,

Ludwig

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Community Member on at

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Hi Ludwig,

For example, i have a contract with related parties for monthly service, so i want to accrue the revenue for each month. So can i use free text invoice for this case?

Thank you so much,

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Ludwig Reinhard Microsoft Employee on at

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Hi Thu Ngo,

For free text invoices you can achieve this by posting a free text invoice each month.

Alternatively, you can make use of what is called recurring free-text invoice. Details for this functionality can be found here:

technet.microsoft.com/.../hh227473.aspx

Best regards,

Ludwig

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Community Member on at

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Hi Ludwig,

Thank you so much,

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guk1964 10,888 on at

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Accruals are often used to estimate the cost of invoices not yet received, so your period closing more accurately reflects true costs, then next month that accrual will be reversed and actuals be booked. You might for example estimate freight as '5% of sales, less freight already invoiced for the period.'

e.g. Payroll typically is run before month end and thus some estimate of earnings for the e.g. the last week of the month is made and this is corrected the next month.

You may also have a need to consider revenue recognition timing e.g. payment is made this month for school fees to a school, and you might get paid annually, but recognize revenue by term.

Allocation is typically done on some basis e.g. sq ft, headcount, %of sales etc.

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Hi magic1949,

Thanks for your reply, i also have the same approach. However, AX treat Accrual scheme for the example i noted on above.

So could you share your ideal of how to record the invoices not yet been received on AX? Because i don't want to make the manual entries.

Thank you so much,

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