How to Recharge Head Office Overheads to Projects
Allocating a portion of head office running costs (salaries, rent, IT) to each active project.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Work-in-Progress (WIP — HO Overhead) | Asset (+) | 15,000.00 | - |
| Head Office Overhead Pool | Expense (-) | - | 15,000.00 |
💡 Accountant's Note
Head office overheads are allocated to projects using a predetermined rate (e.g., % of direct costs or revenue). This ensures the full cost of delivery is captured in each project's WIP.
Practitioner & Systems Framework
💻 ERP Architecture
Run a month-end allocation script. The system pools general admin costs and redistributes them to active jobs based on an allocation metric (often direct labor hours or total direct costs).
⚠️ Audit Flags
IFRS 15 compliance. General administrative costs that are not directly attributable to contract performance should generally be expensed, NOT capitalized in WIP, unless explicitly chargeable to the customer. Over-allocating overheads inflates assets.
📄 Required Documentation
Overhead allocation methodology policy, month-end allocation calculation schedule, and list of included/excluded cost centers.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.