Assessment vs Distribution

Both are used for internal allocation for costs that cannot be directly associated in the manufacturing of a product or service.

Can be used for Cost Centers, Profit Centers, Segments and Functional Areas.

In Assessment, you credit the cost center using a different Cost Element while Distribution will credit the cost center with the same cost element which means that every after assessment, the originating cost object is zeroed out.

In choosing between the two, assessment is more used because there are businesses who would like to trace the origin of costs.

Example of Distribution is that if you use a Cost Center which is just really a temporary cost holder.

You use assessment if you would like to transfer but still would like to trace where it came from?

Example of Allocation:

Electric Bill

There are 4 floors with 4 different departments. We can use a simple allocation that this is divided into 4 every billing period.

Another option is that there is a weighted percentage per department, example: 50% for Department 1, 20 % for dept 2, 15% each for dept 3 and 4.