Using the Ledger Allocation Rule Offset in Dynamics 365 F&O

Have you ever wanted to reallocate expenses in Dynamics 365 for Finance and Operations to various departments and still see the original expense totals in each account on your financial statements? Did you know the source account established in your ledger allocation rule does not have to be the same account used to offset the destination postings in your ledger allocation journal? In the ledger allocation rule setup, you can specify the offset account to either be the source account or another GL account of your choosing.

Scenario:

1. Throughout the month, expenses are posted to 20 individual GL accounts using the Department Financial Dimension value of 001.
2. At month end, you need to reallocate the expenses to two other departments (002 and 003), based on that month’s sales amounts. Department Financial Dimension values 002 and 003 will be debited and Department Financial Dimension 001 will be credited. The offset account for department 001 will be account 600300 (Allocation Expense account).
3. It’s important to note, the accounts used in the original transactions throughout the month are not a part of the ledger allocation journal posting.

Solution:

When you create a ledger allocation rule there are three tabs to work with before you setup the Source and Destination: Overview, General, and Offset. The purpose of the Offset tab is just for the scenario above.

When you first click on the Offset tab, it looks like this:

Out of the box, the offset account is configured to pull the Main Account and Financial Dimension values directly from the Source information. However, in this case, we want the Main Account to be different from the account(s) selected in the Source setup.

To do this, we change Offset account from under the Account column to User specified and select the Offset account we need. We want to leave the Financial Dimensions the same as the Source setup, so no other changes are made in this column.

Before we process the allocation request and create a journal, here is what the Source and Destination setup looks like. The Offset tab can be configured before or after Source and Destination are set up.

Source:

Destination:

Result:

Trial Balance for the Source accounts for the period being run:

Allocation Journal showing the debit lines using the destination account setup and the credit lines using the offset account setup. The source accounts that were selected in the setup are not part of the allocation journal as they are just used to calculate the sum of the source account transactions, similar to how an allocation basis rule’s source is used to calculate the weight given to each destination.

If you’d like to learn more about Dynamics 365 for Finance and Operations, please contact us.