In many cases, these allocations are based on arbitrary factors, such as headcount instead of root causes. Some of the basis for these decisions may include revenue, direct cost, units produced, direct labor hours or dollars, and square footage.
In the example above, headcount may not be truly indicative of how the costs really align. Some additional costs that may be allocated include utilities, rent, repair and maintenance, salaries and benefits. While there are numerous ways the allocations can be done, it is important to ensure the reasoning behind them is documented. Once the calculation is established, the accountant performs it on a consistent basis and books the journal entry. For some companies, this process takes valuable time away from limited resources, not only to perform the calculation and prepare the entry, but also to maintain the allocation table.
Coupled together, BlackLine’s Journal Entry and Transaction Matching modules provide a simple means for creating journal allocations. Allocation tables are created as ad hoc data sources (in an Excel format) and can be used in creating bulk journals to allocate journal line amounts based on specified percentages or set dollar amounts. Once the allocations are uploaded into BlackLine, any changes made to the allocation table are tracked and visible in an audit trail and applied to all future generated journals. The BlackLine application performs the allocation calculation based on the transaction amount and the allocation percentages.