Question

Difference between accumulation,allocation,apportionment and absorption of expeses

Answer 1

Answer:

The distribution of such overhead to several departments or cost centres proportionately on some equitable basis is known as apportionment of overheads. The process of the overhead of a cost centre or department to different cost units or product is called absorption of overhead.

Answer 2

An expense is the "cost of operations" which a company incurs to "generate revenue"

Explanation:

Accumulation of Expenses:  These are expenses which is recognised on the books before it is paid; the expense is "recorded" in the "accounting period" in which it is incurred.

Allocation of Expenses: An expense allocation happens when "direct costs" are assigned to one or more cost objects (like products, departments, a company branch, or programs). Expense allocations are needed  by many "accounting frameworks" to report the whole inventory cost in the financial statements.

Apportionment of Expenses: There are specific expenses which cannot be charged totally to a "specific" shop/department . Hence, such expenses are "apportioned" in a "suitable ratio" over related departments or shops. Apportionment implies distributing of expenses/costs to cost centres on a reasonable & fair basis.

Absorption of Expenses: Absorbed cost/expenses, is a accounting method which accounts for the fixed & variable overhead costs of producing a specific  product.

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Discuss the principles of allocation of indirect expenses in ...

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