Proration definition
/What is Proration?
Generally, proration is the process of dividing up something in a proportional manner, such as the expenses among tenants that relate to common area expenses. Several variations on the concept are noted below.
Proration in Overhead Cost Allocations
Proration can refer to the allocation of under- or over-allocated overhead costs among the work-in-process, finished goods, and cost of goods sold accounts at the end of an accounting period. This type of proration is commonly used when deriving the amount of ending inventory to report on a firm’s balance sheet.
Proration in Tender Offers
Proration can refer to the allocation of cash or shares to shareholders resulting from a tender offer when there is not sufficient cash or stock to fulfill all offers.