Allocation Processing Steps

This week’s episode shows the general steps of an allocation processes, from transactions to balances and back down to transactions. This graphic gives a sense of how the data flows for an allocation process. The costs must be accumulated to a total costs. The activities or drivers must also be accumulated to get to a total number of activities. The total costs are divided by … Continue reading Allocation Processing Steps

Allocation and Activities

This week’s episode of Conversations with Kip continues the allocation series, discussing activity based costing, and how activities can be the drivers for allocating costs to other metrics. Activities in allocation processes, are drivers of cost or at least have some relationship to costs.   For example, employee costs are paid in the form of salaries and wages.  But what the employees do during work … Continue reading Allocation and Activities

Complexity of Allocation Processes

Allocation processes often deal with estimates because at times we are dealing with the future, and the future is not yet known. For example, in the case of allocating the costs of building a factory over the life of the units produced, waiting until the factory has produced all the possible units will make for a very accurate allocated cost, but it will be a … Continue reading Complexity of Allocation Processes

Introduction to the Allocation Series

A somewhat specialized financial system process is called allocation. As noted in this introduction to the series, usually financial reporting is about accumulating business events to measure things over time.  But allocation processes establish relationships between naturally unrelated business events, such as costs to build a factor and the cost of the factory attributable to individually produced units within it. This is episode 180 of … Continue reading Introduction to the Allocation Series