By Donald Cassady, President/CEO, GMS, Inc.
The definition of “Allocate” for purposes of accounting is to spread an expense over a period of time or group of cost centers to achieve more realistic financial reporting.
An example of spreading an expense over a period of time is depreciation. The purchase price of an asset is recorded on a monthly basis over a predetermined length of time representing the typical useful life of that type of asset. There is no guess work here, as the IRS has publications clearly defining the useful life and depreciation method to be used for various types of assets. Generally Accepted Accounting Principles (GAAP) also has standards by which an item should be depreciated.
An example of spreading an expense over a period of time is depreciation. The purchase price of an asset is recorded on a monthly basis over a predetermined length of time representing the typical useful life of that type of asset. There is no guess work here, as the IRS has publications clearly defining the useful life and depreciation method to be used for various types of assets. Generally Accepted Accounting Principles (GAAP) also has standards by which an item should be depreciated.
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