There are cost postings that are relevant for management accounting, but identifying the correct controlling account assignment at the time of posting is difficult. Postings such as telephone costs, postage costs, insurance, and so on, are entered as they arise in financial accounting. The accountant initially posts to an auxiliary cost center created specifically for collecting specific costs. This way, instead of splitting the initial posting into as many cost line items as there are relevant cost centers, the accountant makes a single cost entry.
In management accounting, special allocation cycles are configured for distribution or allocation of auxiliary cost postings. The cycles contain segments, each of which details a sender/receiver relationship. First, the sender rules are defined: Which cost centers and accounts send which values with which cost account. Then, you define the receiver rules: to which cost centers and which values to each cost center.
When you run the allocation cycles periodically, the auxiliary cost center is credited as a sender and the receiver cost centers are debited according to their defined cost share.
In the figure below, you can see these points illustrated, together with more details about the allocation rule definitions:
In overhead cost allocations, the original primary and secondary G/L accounts are not used to credit the sender and debit the receiver. Instead, the costs on both sides are transferred through a secondary cost G/L account with cost element category 42 (assessment).
Statistical Key Figures and Receiver Weighting Factors
In the animation below, you will see how you can further manipulate the values allocated to receivers through the application of weighting factors on statistical key figures:
Executing the Cycle Run
After setting up all your allocation cycles, you run them at the end of each fiscal period after all financial postings are completed.
Depending on the number and complexity of the allocation cycles, there are various ways to process them: