An allocation invoice is typically issued for internal purchases of goods or services within a company, and it is used to allocate the costs of these purchases to a specific department or project. The purpose of an allocation invoice is to accurately distribute costs within the company and manage expenses according to budget items assigned to relevant units.
To record the accounting entry for an allocation invoice, you can follow these steps:
Invoice Information:
- The allocation invoice should include standard invoice details such as seller information, buyer information, invoice number, and date.
Description of Goods or Services:
- Clearly specify which goods or services were acquired. The invoice should explicitly state for which department or project the costs are being allocated.
Quantity and Unit Price:
- Specify the quantity and unit price of the purchased goods or services.
Total Amount:
- State the total amount, which is the product of the quantity and unit price.
Accounting Entry:
- The accounting entry for an allocation invoice is typically made to the relevant department or project cost accounts. This entry is often recorded as an expense account (e.g., "General Expenses" or "Project Costs") with an equal amount debited and credited.
Sample accounting entry:
