General Ledger allocations let you automate the reallocation of costs associated with certain General Ledger account codes or Contract Status contracts. This allows you to allocate an overhead expense to many departments or contracts, or to create a burden on contract cost to cover warranty work. Common examples are rent, utilities, or warranty expenses.
Allocations can be based on a variety of methods; for example: balances of certain accounts such as percentages based on sales or percentage of costs of certain cost heads, or possibly a calculation based on another fixed variable such as the number of employees, office square footage, etc.
The amount being allocated may be removed from an account, but more often is credited to a contra account.