Principles of Accounting - Assignment Example

The existing cost allocation uses factors that identify the portion of costs for each multi-purpose facility that are specific to individual purposes (separable factors) and the proportional allocation of remaining joint costs among multiple purposes (joint factors). c. COE-Transferred Facilities – These include facilities that were constructed by the COE and transferred to Reclamation for operational and financial integration with the CVP. They appear in Schedule No.1 of the CVP financial statement. d. Non - Reimbursable Costs – The plant-in facilities include components directly set aside to a non-reimbursable category pursuant to Congressional legislation.

In the CVP allocation, these component costs are directly assigned to the appropriate category and are removed from the allocation base. f. State Share of San Luis Unit - In the allocation of CVP costs, the State share of the construction costs of joint-use facilities is directly assigned to the State and removed from the allocation base. The above-said approach seems to be good. This is because the costs are identified and allocated separately. After completing the adjustments the remaining costs represent the total capital investment to be allocated among the authorized project purposes of the CVP.

For single-purpose facilities, costs are allocated in total to the purpose served. Cost allocations can be made both within and across time periods. If two or more cost objects share a common facility or program, the cost pool of the shared unit is a common cost to the users and must be divided or allocated to them. Bases of allocation typically are based on one of the following criteria: cause-and-effect benefits derived, fairness, or ability to bear. The selection of a criterion can affect the selection of a basis (Answers.com). Some cost information is reported to external users such as shareholders and creditors.