Apportionment

Apportionment

Apportionment means division into parts and it is used in accounts and insurance business. It is the act of sharing something between several people or organizations. The basis used for the apportionment of costs between a number of cost centers when the costs are to be shared between them equitably. In simple terms, the expenses which are unallowable are dispersed over multiple departments, is known as apportionment.

When it is used in accounts it denotes the division of income and expenditure but in case of insurance, it signifies the division of total loss to be borne by different parties involved. It is the separation of revenues, expenses, or profits, which are then assigned to different accounts, departments, or subsidiaries. For example, the total income of a multi-state entity could be apportioned to its state-level subsidiaries based on their individual sales, headcount, asset base, or cash receipts.

In insurance terms, it is the act of deciding how responsible each person or organization is for something and therefore how much of the costs they or their insurance company should pay. This allocation is used to determine a percentage of liability for each insurer. In the accounting term, it is the act of dividing costs between different accounts in a fairway or the amount that is put into each account.

In the property terms, it is an agreement between the buyer and seller of a property to share the costs of the property during the time that the sale is being completed. Apportionment in respect of estate may result either from the act of the parties or from the operation of law. It typically refers to the allocation of property expenses, such as maintenance, insurance, and taxes, between the buyer and seller at the time of a transaction that involves a piece of real estate. This occurs when an overhead cannot be directly assigned to one particular cost center.