What is an Appropriation in Accounting Terms?

What is an appropriation in accounting terms? While the term appropriation can have several different definitions, for accounting purposes appropriation refers to how money from profits into a company has been spent or used.

One definition of appropriation is to set aside, specifically money, for a particular purpose. For accounting, this specifically refers to profit money in a company. The use of this money is particularly important to investors, which is why all profits spent must be accounted for. For example, a company may decide to appropriate a certain amount of their profits for a capital expenditure, such as a new building.

Public Funds

Another way we hear of appropriaton is when the government appropriates funds for specific projects. This can be through a vote or legislative act, but it is similar to a business appropriating money. The government decides where specific money goes and assigns it to that project.

For example, the United States Congress appropriates money from the budget for Naval operations. A Navy dispersing clerk is responsible for reporting disbursements correctly since at any one time three budgets are in effect: the previous years being reconciled, the current one being used, and the next one being created.

Future budgets can be directly impacted by the improper recording procedures, since funding allocation can be re-appropriated in the future and sent to another agency or department.

What is appropriation in accounting? Appropriation means allocating funds to specific projects. The money can then only be used for that project and nothing else. Businesses must detail appropriations on their balance sheet since if it is for a capital expenditure or the profit and loss statement if profit is redirected into revenue expenditures.