Concept in Definition ABC

The verb apportion refers to the action of dividing the cost of something between several sections or items. It is a very common term in the business world, specifically in the field of accounting.

A general idea

Let's imagine a company that has periodic electricity expenses. In order not to compute said expense in a single budget item, the cost of electricity is divided between the different departments of the entity (sales, administration, from production, etc.).

The action of apportionment is applicable to different contexts: in the control of expenses, in the payment of taxes (for example, VAT) or in the judicial sphere (for example, there is the apportionment of pension from food when the food quota has to be distributed proportionally among the beneficiaries).

In relation to business accounting, the concept of apportionment can be understood at two levels: primary or secondary.

Primary apportionment

It consists of distributing indirect production costs among the different departments of a company. In this way, expenses such as the rent of the premises, the

electric power or the consumption of water can be divided taking into account a series of parameters (the rent of the premises is prorated in square meters, the Energy in kilowatts and water in cubic meters consumed). These measurement parameters are distributed equitably between the different departments and in this way each part of the company assumes some expenses in a proportional way. With this strategy accounting, it is possible to have a more precise view of the functioning of an entity.

Secondary proration

Once the primary apportionment of each of the production overhead has been completed, Indirect charges accumulated are redistributed among the different production centers of a business. This distribution is also carried out on the basis of distribution bases (for example, the space occupied by each department or the number of working hours of each service or department). This strategy has the objective of carrying out an accounting spill in a proportional way.

These types of accounting operations are useful in several ways

1) help to structure a company accounting,

2) provide information on indirect production concepts,

3) allow to identify the relationship that exists between the different departments and

4) facilitate the understanding of all the concepts that make up the functions of a company.

Photos: Fotolia - Motorradcbr / Abdul Qaiyoom

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