“Unallocated” is an accounting term that refers to expenses or revenues that have not been specifically assigned or attributed to a particular cost centre, product line, or other category. In other words, unallocated expenses or revenues are not directly linked to a specific activity or item.
For example, if a company incurs general and administrative expenses such as rent, insurance, and office supplies, but does not assign these costs to specific departments or projects, they would be considered unallocated expenses. Similarly, if a company receives income from a general fund or account that is not specifically linked to a particular product or service, it would be considered unallocated revenue.
Unallocated expenses and revenues are often considered indirect costs or revenues because they cannot be directly traced to a specific product, service, or activity. These costs and revenues are usually allocated to cost centres or products based on certain assumptions or allocation methods that are considered to be reasonable and consistent.
Unallocated expenses and revenues can have an effect on the profitability of a specific product or department, and also on the financial performance of the whole company. It’s important for managers to understand the impact of unallocated expenses and revenues on their financial statements, and to have effective methods for allocating them in order to have a clear picture of the company’s performance.