What is the allocation base?

The allocation base is the basis used to divide items between a group of similar items. There may be the only rule for allocating the total group of similar items, or there may be a set of rules used to distribute the total amount to different members of the group. The cost -based accounting is traditionally used a single rule, and more rules are used in activities based on activities. Each organization determines how it will implement its allocation base. In financial accounting, the rules of allocation may be determined by generally received accounting procedures in a given jurisdiction. Accounting based on activities can be provided greater freedom with the way the allocation is completed if its implementation follows the generally accepted practices in this industry. Each sector can set standards as the allocation base is devyed and who has the right to determine the base of the allocation. At this point, the company is responsible for measuring the product volume responsible for allocating the volume of Products between different owners. The system operator, the party takes over the delivery of the product or generally accepted practices, can indicate the base for this particular location.

In the financial accounting situation, the generally accepted accounting procedures set out the parameters for how the allocation base can be completed. For example, the first product to the system may first receive its part. Alternatively, the latest product may first receive an allocation to the system, otherwise all products in the system can receive a pro-rated part of the available volume.

Within the gas pipeline for natural gas, the allocation on each of its acceptance and delivery points may be determined differently. The party supply to the pipeline may determine the allocation scheme for individual accounts at the point of acceptance in the pipeline. The delivery party could determine this system on the basis of the price each of the parties paid by the natural gas manufacturer. ToolStating gas from the pipeline because it leaves the pipe system, usually sets the allocation scheme for this place. A public service company could set its allocation base using its tariffs class as a basis for how gas is allocated between the parties that receive gas at their entry point.