The Oracle HRMS Cost Allocation Key Flexfield Example

To construct a simple example of a Cost Allocation flexfield, suppose that the departments of an enterprise each constitute a cost center. Suppose also that the general ledger accounts receiving labor costs are Salaries, Wages, Overtime, Bonuses, Union Dues Liability and Clearing.

The Clearing account in this example represents a single account set up for entry of:

• Credits, in order to balance debits to accounts for earnings types, for example Salaries, Wages, Overtime and Bonuses

  • Debits, in order to balance credits to accounts for deductions, for example Union Dues Liability.

  After running the Payroll and Costing processes, you can make journal entries to credit or debit each individual balancing account, making corresponding debits or credits to the Clearing account.

Information to be transferred to the General Ledger includes:

• The totals of salaries and wages paid in departments and cost centers are entered as debits to the Salaries and Wages accounts, and as balancing credits to the Clearing account.

• The total of bonuses paid to employees is entered as a debit to the account Bonuses, and as a balancing credit to the Clearing account.

• The total deducted from employees in Production and Quality Control to pay their union dues is entered as a credit to the Dues Liability account, and as a balancing debit to the Clearing account.

To collect information for transfer to the general ledger, this enterprise can construct a Cost Allocation flexfield with two segments, one for identifying cost centers and one for GL costing and balancing codes, as shown in the table below:

The Cost Allocation two segments table

Now suppose that for labor distribution purposes, this enterprise accumulates labor costs not just by cost center and GL account, but also by its product lines, represented by the labor distribution codes H201, H202, H305, H307 and H310. The enterprise requires product line costing information such as the following:

• Total wages paid to produce product line H201, and to check its quality

• Total paid for overtime to produce product line H201

• Total paid for salaries and bonuses to sell product line H201

Since this enterprise uses its GL codes for labor distribution, it does not need another segment to hold a separate list of codes. However, it must add another segment to hold product line codes, as the table below shows:

Cost Allocation product line codes table

Similarly, if this enterprise needed to identify for each of its payrolls a particular company or ledger to which all the information on labor costs should go, it could define another segment of the Cost Allocation flexfield such as Company or Ledger, to contain a list of the appropriate codes.