Accounting of expenses allocated to profitability & cost in management accounting

Here you will learn how to set up accounting for expenses allocated to the company's profitability & cost, including:

• • Administrative expenses.
• • Other non-operating expenses (cost of fixed assets and raw materials sold, AR write-off, and other).
• • Financial expenses.

Pool of expenses (temporary) allocated to profitability & cost can be: Expense item or Cost center. Cost centers store, transit, and allocate expenses related to certain business functions, including administrative, financial, and other non-operating functions that are not related to manufacturing. A cost center is a dimension for an expense item. You can use it in the following ways:

• • As an aggregation node for detailed, itemized expense accounting in source documents and subsequent allocation of an aggregated expense amount.
• • As an intermediate cost pool to subsequently allocate costs by items according to common principles.
• • To account for costs in detail by system objects (for example, work centers and teams) and non-system objects that do not have corresponding breakdowns in the structure of itemized expense accounting breakdowns.

At the period end, you must write off all expenses from temporary cost pools to the company's profitability and cost.

With the system, you can account for expenses by the Line of business dimension. You can identify the dimension using one of the following methods:

• • Direct method. The dimension is identified in a system document that records the expense. In this case, you do not need to set up allocation by lines of business. The method is available for most expense record documents including Purchase invoice, Vendor invoice — Services and Assets, Credit and deposit interest charge, and others.
• • Indirect method: amounts are allocated by the statistical database within the Period-end closing procedure. In this case, you must set up the allocation by lines of business. Use this method only when you cannot specify a line of business in the expense record document. If a cost pool is an Expense item, specify cost allocation rules in the item record. If a cost pool is a Cost center, create separate expense items where costs are recorded to cost centers only. In the Cost center catalog record, set up cost allocation rules.

You can set this up after you configured Basic management accounting capabilities.