Expense allocation definition - AccountingTools
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An expense allocation occurs when indirect costs are assigned to cost objects. Expense allocations are required by several accounting ... AccountingTools CPECourses CPECourses CPELogIn HowtoTakeaCourse StateCPERequirements Books CollegeTextbooks AccountingBooks FinanceBooks OperationsBooks CPAExamStudyGuides Articles Articles TopicsIndex SiteArchive Podcast AccountingBestPractices PodcastIndex PodcastSummary Dictionary FAQs About About Contact EnvironmentalCommitment Home AccountingTools CPECourses/CPECoursesCPELogInHowtoTakeaCourseStateCPERequirements Books/CollegeTextbooksAccountingBooksFinanceBooksOperationsBooksCPAExamStudyGuides Articles/ArticlesTopicsIndexSiteArchive Podcast/AccountingBestPracticesPodcastIndexPodcastSummary Dictionary/ FAQs/ About/AboutContactEnvironmentalCommitment Home/ AccountingTools AccountingCPECourses&Books Articles AccountingTools CPECourses/CPECoursesCPELogInHowtoTakeaCourseStateCPERequirements Books/CollegeTextbooksAccountingBooksFinanceBooksOperationsBooksCPAExamStudyGuides Articles/ArticlesTopicsIndexSiteArchive Podcast/AccountingBestPracticesPodcastIndexPodcastSummary Dictionary/ FAQs/ About/AboutContactEnvironmentalCommitment Home/ RelatedCoursesActivity-BasedCostingCostAccountingFundamental WhatisanExpenseAllocation?Anexpenseallocationoccurswhenindirectcostsareassignedtocostobjects.Expenseallocationsarerequiredbyseveralaccountingframeworksinordertoreportthefullcostofinventoryinthefinancialstatements.Acostobjectisanythingforwhichacostiscompiled.Examplesofcostobjectsareproducts,productlines,customers,salesregions,andsubsidiaries.Anindirectcostisacostthatisnotassociatedwithasingleactivity.Examplesofindirectcostsarefacilityrent,utilities,andofficesupplies.Acompanymayallocateitsindirectcostsinordertodeterminetheentirecostofacostobjectonafullabsorptionbasis.Fullabsorptionreferstotheassignmentofallpossiblecoststoacostobject,sothatthecostsofallactivitiesareconsidered.ThisapproachisrequiredundertheGenerallyAcceptedAccountingPrinciples(GAAP)andInternationalFinancialReportingstandards(IFRS)accountingframeworks. ExpenseAllocationInaccuraciesByitsdefinition,anallocationisboundtobeimprecise.Thus,theresultingfullabsorptioncostingofacostobjectisinherentlyinaccurate.Ifabusinessdoesnotrequireanoverlypreciseexpenseallocation,itcanrelyuponasimpleformulathatiseasytoderive.Thisapproachiscommonlytakenwhenusingexpenseallocationtocomplywiththedictatesofanaccountingstandard.However,ifconsiderablymoreprecisionisneeded,perhapstomakeamanagementdecision,thenamorecomplexallocationmethodcanbeused,suchastheactivity-basedcostingsystem.ExamplesofExpenseAllocationMethodsExamplesofexpenseallocationmethodsarenotedbelow.DirectLaborHoursFactoryoverheadcostsareroutinelyallocatedtoproductsbasedonthenumberofdirectlaborhoursusedintheproductionoftheproducts.Theresultingallocationcanbequiteinaccurate,butiseasytoderive.RevenueThecostofcorporateheadquartersmaybeallocatedtosubsidiariesbasedontheirrevenue.Thereasoningbehindthisallocationisthatthesubsidiarywiththehighestactivitylevelcanaffordtobeartheburdenofcorporateoverhead.SquareFeetIfacostobject(suchasaproductionline)takesupafairamountofsquarefeet,thoseexpensesrelatedtofacilitiescostscanbeallocatedbasedonthesquarefeetusedbythecostobject.StaffingIfthebulkofacompany'scostsarerelatedtopersonnelcosts,considerallocatingtheindirectcostsofpersonnelbasedonthenumberofemployeesorthenumberoflaborhoursconsumed.Thisapproachworksbestinaservicesbusiness,wheretherearemanyemployees. Annuitymethodofdepreciation... Loanimpairmentaccounting CPECourses/CPECoursesCPELogInHowtoTakeaCourseStateCPERequirements Books/CollegeTextbooksAccountingBooksFinanceBooksOperationsBooksCPAExamStudyGuides Articles/ArticlesTopicsIndexSiteArchive Podcast/AccountingBestPracticesPodcastIndexPodcastSummary Dictionary/ FAQs/ About/AboutContactEnvironmentalCommitment Home/ AccountingTools CollegeTextbooksAccountingBooksFinanceBooksOperationsBooksCPAExamStudyGuides Sendusyoure-mailaddresstoreceivemonthlycoursediscounts * Thankyou! Copyright2022
延伸文章資訊
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