Periodic Cost Allocation—Key Exercises

Required Data

Purpose: Actual periodic cost allocation (PCA) is used to perform periodic operations on general ledger balances. A typical example is the allocation of indirect costs to cost centers. A budget periodic cost allocation is used to perform cost allocation on budget balances.

Steps: To complete the periodic cost allocation exercises, the following data must exist.

1. A company with three or more cost centers. 

2. Revenue balances by cost center and cost balances not by cost center. These transactions can be entered in the Voucher Entry exercise.

3. All transactions for the period should be updated to the general ledger when actual PCA is used.

4. The budget values should exist in order to perform an budget PCA.

Basic Data Setup

Enterprise

Purpose: The purpose of this exercise is to set up the company tab for periodic cost allocation (PCA).

Windows:
Company

1. Query for your company.
2. Click the Periodical Cost Allocation tab, and enter the information in the table below.

Rollback Mode	Correction Mode	User Group
Correction (select from the list)	Single (select from the list)	Select your user group from the List of Values

Note: The Rollback Mode has two alternatives: Correction and Rollback. Both modes return the balances to their original state before the PCA voucher is created. The difference is that Correction creates a voucher that is the reverse of the original PCA voucher, thereby providing an audit trail, whereas rollback reverses the original PCA voucher as if it was never created. Select Rollback if you do not need the audit trail.

The Correction mode also has two alternatives: Single and Batch. Single allows the user to execute PCA lines one at a time and therefore be able to see what the system is doing at each step. This is suggested for new PCA procedures. Once the user is confident that the PCA is performing correctly, the Correction mode can be changed to Batch mode.

Accounting Rules

Purpose: The purpose of this exercise is to set up the basic data required for periodic cost allocation. The period must be closed for all user groups except the group authorized to process the PCA. This user group must be connected to the voucher type specified for the allocation.

Windows:
Voucher Type
Accounting Periods

1. Open the Voucher Type window. Verify that the PCA voucher type has the values shown in the table below.

Automatic Allotment	Store Original	Function Group
Checked	Checked	Z

2. Make changes as necessary, and save them.
3. Right-click and then click Voucher Series.
4. Select the current year, right-click, and then click User Group per Voucher Series.
5. Verify that your user group has the values shown in the table below.

User Group	Authorize Level	Default Type	Function Group
Your user group	Enter and Approve	Yes	Z

Windows:
Accounting Periods

1. Open the Accounting Periods window, and query for the current year.
2. Select the line for the period being used for the allocation process. Right-click and then click User Groups per Period.
3. Close the period for all user groups except the user group that is authorized to perform the PCA.
4. Save your changes.

Main Exercise

Actual Periodic Cost Allocation

Purpose: The purpose of this exercise is to show you how to perform periodic operations on general-ledger balances. The allocation could be for any purpose required by the business, including the creation of new balances based on end-of-period balances. The following example allocates costs to cost centers based on the revenue that each cost center has earned during the period. The company must have cost balances in the general ledger that need to be allocated to cost centers, and there must be revenue balances that are assigned to cost centers.

Periodic operations are performed by procedures. A procedure consists of a number of steps, which can include distributions and factors that are entered manually or calculated automatically from period balances. The procedure is run once per period, generally when all accounting work for the period is finished and the period is about to be closed.

If the results of the procedure are not satisfactory, it can be rolled back. Once the procedure is satisfactory, it can be copied for use in another period. The copied procedure can then be changed if necessary.

Cost Allocation Procedure

Windows:
Cost Allocation Procedures

1. Create a new procedure.

2. Press new again and enter the values shown in the table below.

3. Save your changes. The status is Defined.

Cost Allocation Distribution

Purpose: The purpose of this exercise is to show you how to define which code parts will determine the allocation. In this case, we will have the distribution calculate automatically based on the percentage of revenue each cost center generated during the period.

Windows:
PCA Distributions

1. Query for your allocation procedure.

2. Create a new table record, and enter the values shown in the table below.

3. Save your changes.

Defining the Steps – Prepare Distribution

Purpose: The purpose of this exercise is to familiarize you with the five possible step types in the cost allocation procedure. These steps can be used to prepare manual vouchers, prepare factors, prepare distributions, generate automatic vouchers, or update vouchers to the general ledger. They can be used more than once in a procedure depending on the complexity of the allocations. The first step for this allocation is to prepare the distribution, which means that you will identify the specific account strings that will determine the allocation percentages.

Windows:
PCA Step Definition

1. Query for your procedure.

2. Enter a new line in the table portion of the window, and enter the values shown in the table below.

Seq No	Step ID	Step Type	Description	Distribution ID
1	Step 1	Prepare Distribution (select from the drop down box)	Revenue Portioning	1

3. Save your changes.

4. Select the line, right-click, and then click Detailed Definition.

5. Add a new line in the table with the values shown in the table below.

Step Item Sequence	Description
1	Sequence Step

6. Save your changes.

7. Select the line, right-click, and then click Step Details Specification.

8. Add a new line in the table portion of the window, and enter the values shown in the table below.

Object	Object Name	Operator	Value Type	From Value	To Value
Codepart	Account	Equal	Codepart	Enter the revenue account
Codepart	Cost Center	Between	Codepart	Enter the first cost center to be used in the allocation	Enter the last cost center to be used in the allocation

Note:  The purpose of this window is to identify the specific account strings to be used to calculate the ratios for allocation. If you have a range of revenue accounts, you could use the Equal operator and enter the account From Value as 4% if only your revenue accounts start with the number 4. Adjust the entry as necessary for your accounting system.

9. Save your changes.

10. Select the line, right-click, and then click Show Balances Selected by Step Details to display the balances that will determine the allocation percentages. Correct balances indicate that the steps have been completed correctly.

Defining the Steps – Generate Voucher

Windows:
Step Definition

1. Query for your procedure.

2. Enter a new line in the table portion of the window, and enter the data shown in the table below.

Seq No	Step ID	Step Type	Description	Posting Mode	Distribution ID
2	Step 2	Generate Voucher (select from the drop down box)	Voucher	Reposting	1

3. Save your changes.

4. Select the line, right-click, and then click Detailed Definition.

5. Add a new line in the table portion of the window, and enter the values shown in the table below.

Step Item Sequence	Description
1	Sequence Step

6. Save your changes.

7. Select the line, right-click, and then click Step Details Specification.

8. Add a new line in the table portion of the window, and enter the values shown in the table below.

Object	Object Name	Operator	From Value
Codepart	Account	Equal	Enter the cost account to be allocated
Codepart	Cost Center	Has No Value

Note:  The purpose of this window is to identify the specific account or accounts that must be allocated to the cost centers based on the ratios created in step one. If there is a range of cost accounts that should be allocated, you will need to adjust the entry.

9. Save your changes.

10. Click the Same Side tab, and create a new record.

11. Enter an asterisk (*) in the account field, and save your changes.

12. Right-click and then click Show Balances Selected by Step Details to view the balances that will be allocated. Correct balances indicate that the steps have been completed correctly.

Defining the Steps – Update General Ledger

Windows:
PCA Step Definition

1. Query for your procedure.

2. Add a new line in the table portion of the window, and enter the values shown in the table below.

Seq No	Step ID	Step Type	Description
3	Step 3	Update GL (select from the drop down box)	Update GL

3. Save your changes.

Executing the Periodic Cost Allocation

Windows:
Cost Allocation Procedures
GL Vouchers Analysis

Note: The purpose of this exercise is to show you how to manually update a PCA voucher to the general ledger. This does not automatically occur when you execute a step that generates a periodic cost allocation voucher. 

1. Open the Cost Allocation Procedures window, and query for your procedure.

2. Select the line, right-click, and then click Set Active.

3. Right-click again, and then click Definition of Step. You should see the three steps that were created earlier.

4. Select the first step, right-click, and then click Execute. The Executed check box should be checked.

5. Execute the remaining steps.

6. Open the GL Vouchers Analysis window, and query for Voucher Type PCA.

7. Select the voucher, right-click, and then click Voucher Details. If the voucher transactions are incorrect, you can roll them back.

Closing the Procedure

Windows:
Cost Allocation Procedures

1. Query for your procedure.

2. Select the line, right-click, and then click Set Closed.

3. The Date Closed field shows the date, and the User ID field shows which user closed the procedure.

Rolling Back the Procedure

Windows:
PCA Step Definition

Note:  If the procedure has been set to Closed, you must set it back to Active before rolling back the steps.

1. Query for your procedure.

2. Select the last line in your procedure that was executed, right-click, and then click Rollback.

3. The Executed check box is no longer checked.

4. Continue rolling back lines until you have finished.

Note:  If you are rolling back lines to change a step, you need to roll back only up to the point of the change. Then execute the steps again, and view the resulting voucher.

Copying the Procedure

Windows:
Cost Allocation Procedures

1. Query for your procedure.

2. Select the line, right-click, and then click Copy Procedure.

3. Enter your company ID and the period for the new procedure. A new procedure line is generated. All steps, distributions, and factors that existed in the original procedure have also been copied.

Note:  Copying steps, distributions, and factors works the same way as copying a procedure except that you must specify whether they are being added to the procedure or are replacing existing items in the procedure.