Allocating Expenses to the Final Product Cost
In most cases, production and sales operations generate expenses such as shipping, manufacturing, import fees, and similar costs. It is essential to load these expenses onto the cost of the final product.
Before creating the purchase invoice you want to allocate expenses to, make sure the stock permissions setting is enabled.
You can allocate a specific percentage of an expense to a stock entry rather than its full value, while the system automatically tracks the remaining balance of each expense across different stock entries — allowing a shared expense (such as shipping or storage) to be distributed across more than one entry with precision.
Steps to Allocate Expenses
- Click on “Inventory” from the main menu.
- Click on the stock entry that includes the purchase invoice you want to allocate expenses to.
- Click on “Allocate Expenses.”
- Enter the expense allocation details as follows:
- Type: Select the nature of the expense being allocated:
- Expense: You can select any expense in your account.
- Journal Entry: You can select any journal entry in your account.
- Expense: Select the expense or journal entry whose value will be distributed across the products. You can choose from existing expenses in the account or add a new one.
- Allocated Amount: You can specify the allocated amount either as a value or as a percentage. The following fields appear:
- Percentage (%): The percentage to be allocated from the remaining balance of the expense — positive numbers with a maximum of 100. Cannot exceed the available percentage and updates in real time when an amount is entered.
- Allocated Amount: The allocated amount in the local currency, updated in real time as the percentage is entered.
- Distribution Type: How the calculated amount is divided across product lines:
- Manual: You manually assign a portion of the expense value to each product yourself.
- Amount: The expense cost is automatically distributed based on each product’s cost.
- Quantity: The expense cost is automatically distributed based on each product’s quantity.
- Type: Select the nature of the expense being allocated:
- Click “Save” — only the allocated portion is deducted and the remaining balance stays available for other entries.
Once you add the expense details, cost, and distribution type, the table displays each product’s cost before and after the expense allocation.
How the System Works
- Calculation formula: Allocated Amount = Remaining Expense Balance × Percentage. Example: a shipping expense of 1,000 with 40% (400) allocated to one entry — 60% (600) remains available for other entries.
- Other distribution types (Amount / Quantity / Manual): The basis for distribution becomes the remaining expense balance rather than its original value. Example: an expense of 1,000 SAR with 400 allocated to entry (A) — when selected with “Amount” type on entry (B), the system distributes the remaining 600. After saving with these types, the expense is fully consumed and closed.
- The expense selection list displays the available balance next to each expense, for example: #000076 04/11/2025 — Remaining: 60% (600 SAR). An expense is permanently excluded from the list once its remaining balance reaches zero.
- When an allocation line or the entire allocation form is deleted, the consumed amount is immediately returned to the available expense balance.
- Percentage-based allocations are recorded in the stock entry’s activity log like all other distribution types.
Validation Rules
If a percentage exceeding the available balance is entered, the following message appears: “The entered percentage exceeds the available allocation amount for this expense. Available: [X]%.”