Should I post cost pool calculations to the GL?
The answer depends on the desired Income Statement presentation. Posting the cost pool calculations to the GL will reclassify the presentation of the costs on the Income Statement.
Using the example shown above, upon posting the cost pool calculation, the sum of the balances in the accounts in "60 - Fringe Expenses" will post as a Credit to account 60.02.99 (the Pool "Post Account"), essentially zeroing out that section on the Income Statement.
The posting process will also record Debits into each of the Base "Post Accounts."
The Income Statement presentation is a client preference, but typically we see the following:
- If the cost pool group is an intermediary pool, such as Facilities, then these Cost Pools are posted to GL.
"62 - Facilities Expense" will no longer show up as a separate line item on the Income Statement. It will be allocated to Direct, Overhead, and G&A as noted in the "Post Accounts" below.
- Fringe is often posted to the General Ledger as well. We see commonly that clients wish to report their labor costs including the calculated fringe burden.
- Other considerations regarding the Income Statement presentation are below:
- Typically, if Gross Margin or Direct Margin is a subtotal on the Income Statement, then cost pool calculations would not be posted to the GL, because indirect costs would be included in the "Direct Costs" section after the post.
- If Gross Profit from Operations is the first subtotal on the Income Statement, then cost pool calculations would be posted to the GL.