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hi guys
i hope that you help me sorting out the difference between valuation and allocation assertion , related to balance sheet , i couldn’t find the difference between both terms , why we use both .
thanks in advance , wish u all the best in next f8 exam sessionValuation: An assertion made by management that each asset and liability is recorded at an appropriate carrying value.
Allocation: Distribution according to a plan. Depreciation, amortization, and depletion are methods to allocate costs to periods benefited.
According to me allocation is not an assertion on its own, the term is Valuation and Allocation, and they together form an Assertion.
Someone correct me if I’m wrong.
If you see by the definitions, Valuation is the process of finding out the correct values of items ( E.g: Buildings less accumulated depreciation = C.V of Buildings)
And Allocation is the means of assigning costs to those assets/ liabilities to increase/ decrease, it’s value. In short, you can’t get to a value, without allocating the costs to the item under consideration.
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