CO 202 · MODULE TOPIC
How do internal allocations work?
Internal allocation turns shared-resource cost into a traceable charge to the cost objects, products, projects, or market segments that consumed it.
What this capability is for
Allocation is a business rule with accounting evidence. The sender, receiver, driver, period, cost behavior, reversal, and report must all tell the same story.
WORKING FLOW
Follow the management question through the record
Choose the economic rule
Decide whether the original primary cost must remain visible, a secondary assessment category is appropriate, or an activity quantity and price should carry the value.
Validate senders and drivers
Confirm sender balances, receiver eligibility, driver data, version, period, and treatment of zero or missing values.
Run the cycle
Run the controlled allocation and retain the log, tracing factors, debit/credit results, and exception population.
Prove cost conservation
Sender credits, receiver debits, quantities, and any remaining balances must reconcile to the stated allocation method.
CONTROL POINTS
What makes the result trustworthy?
Distribution
Distribution retains the original primary cost element at the receiver. It is useful when recipients must see the original nature of the cost.
Assessment
Assessment uses a secondary cost category or account for the allocated amount, grouping sender costs into an agreed management view.
Activity allocation
A sending cost center provides a measurable service, such as machine or repair hours, priced through an activity type. It links cost to a quantity-based consumption signal.
The workshop records labor, parts, and facilities cost. Approved repair hours are confirmed to production orders. The output quantity and rate explain the debit to production and the credit to the workshop; unexplained under-absorption remains visible for review.
Follow cost from source posting through allocation, close, and management reporting.