Search
Close this search box.

Table of Contents

Appropriation



Definition

Appropriation in finance refers to the allocation of funds to particular departments, projects, or aspects within a business, organization, or government. It’s a budgetary process that officially sets aside or “appropriates” funds for specific costs or expenditures. This term can also be used in the context of earnings, where company profits may be appropriated to reinvestment or paying dividends.

Phonetic

The phonetics of the word “Appropriation” is: /əˌprəʊpriˈeɪʃn/

Key Takeaways

Sure, here are the three main takeaways about Appropriation in HTML numbered form:“`html

  1. Appropriation refers to the use of pre-existing elements within a new work. This can be from culture, art, or any other context. The use of these elements is often done without the permission of the original creators.
  2. It can be seen as a form of cultural borrowing or exchange, but it can also be viewed negatively as theft or cultural misappropriation, especially when the appropriated culture is disempowered and unable to control how its elements are used or interpreted.
  3. The concept of Appropriation is widely used in the arts, where artists might use existing materials or draw from existing artistic works in the creation of something new. It can be a form of commentary, critique, or homage. While some argue this can be an important form of creative expression, others argue that it can infringe on intellectual property rights.

“`Please modify the content according to your need.

Importance

In the world of business and finance, the term “appropriation” carries significant importance as it refers to the deliberate allocation of capital resources in a financial manner towards specific activity or expense. This is crucial as it enables businesses to adequately allocate resources for various activities such as funding projects, paying dividends, or reinvesting in the business. It contributes to effective financial planning and budgeting, ensuring that expenses are covered, potential investments are pursued, and stakeholders are satisfied. Therefore, efficient appropriation aids in maintaining fiscal discipline, supporting financial stability, and facilitating strategic development for an enterprise.

Explanation

Appropriation in finance/business context is essentially a legal authorization granted by a governing body, often government, to allocate specific amounts of public funds for certain purposes. Its overarching purpose is to maintain financial control and infusion of accountability within various administrative and governmental organizations, thereby preventing any unauthorized or frivolous spending of public money. By setting an appropriation, the government or administrators can set specific funds for different departments, projects, or programs as needed.Appropriations are widely used in government spending and budgeting. For example, the U.S. Congress appropriates funds for federal agencies, specifying how much money can be spent on particular initiatives or programs. This ensures that public funds are utilized in a manner that aligns with strategic objectives and policy goals. On a corporate scale, companies may also use appropriations to allot a certain portion of profits for reinvestment, loan repayment, or other defined purposes as part of their financial management strategy. In this way, appropriations serve as a key financial management tool that helps in proper allocation and control of funds.

Examples

1. Governmental Budget Appropriation: This is one of the most common examples of appropriations, particularly within the public sector. When a government prepares its budget, it appropriates specific amounts of taxpayer funds for different purposes, such as healthcare, defense, or education. For instance, the U.S. Congress appropriates billions of dollars each year for the Department of Defense to cover its operations, equipment, and personnel costs.2. Corporate Appropriation: Within corporations, appropriations are often made for specific costs such as research and development, marketing, or staff salaries. For example, a pharmaceutical company might appropriate a substantial portion of its budget to the research and development of new drugs.3. Nonprofit Organization: In a nonprofit setting, the board may appropriate funds for specific purposes like community outreach programs or upgrading infrastructure. For example, a charitable organization receiving an endowment might appropriate the funds into different areas like program development, overhead costs, outreach efforts, and emergency funds.

Frequently Asked Questions(FAQ)

What is appropriation in finance and business?

Appropriation refers to the allocation of specific amounts of money to particular departments, activities, or projects in a company or government body. In terms of a business, it often refers to a portion of profit that is legally separated for a specific purpose.

How does appropriation work in a government context?

In a governmental context, an appropriation is the authorization granted by a legislative body to supply funds for a particular use or purpose. It typically goes through a budgeting process where the government decides where to allocate the finances.

What is the significance of appropriation in a company?

For businesses, appropriation is crucial as it involves setting aside funds from the profit for specific purposes such as reinvestment in the business, paying off debt or dividends to shareholders. It aids in better financial management and control.

How is an appropriation recorded in financial statements?

Appropriation is usually recorded under the equity section of a company’s balance sheet. The retained earnings statement also reflects the appropriations showing a deduction from the unappropriated retained earnings.

What happens if an organization goes over their appropriated funds?

If an organization exceeds their appropriated funds, they may need to get approval for additional funding, reduce expenses or potentially face legal consequences, depending on the regulations governing those funds.

What does an Appropriation Bill mean?

An Appropriation Bill, also known as supply bill or spending bill, is a proposed law that authorizes the government to spend money. It is legislation that allows the government to withdraw funds from the country’s consolidated fund to meet its expected expenses.

Can the appropriation of funds be changed after approval?

Typically, alterations to approved appropriations require subsequent approval from the legislative body or governing body of an organization.

What does unappropriated profit mean?

Unappropriated profit is the portion of a company’s profit which has not been reserved for a specific purpose or distributed as dividends. It is generally available for reinvestment into business operations or for distributing future dividends.

Related Finance Terms

Sources for More Information


About Our Editorial Process

At Due, we are dedicated to providing simple money and retirement advice that can make a big impact in your life. Our team closely follows market shifts and deeply understands how to build REAL wealth. All of our articles undergo thorough editing and review by financial experts, ensuring you get reliable and credible money advice.

We partner with leading publications, such as Nasdaq, The Globe and Mail, Entrepreneur, and more, to provide insights on retirement, current markets, and more.

We also host a financial glossary of over 7000 money/investing terms to help you learn more about how to take control of your finances.

View our editorial process

About Our Journalists

Our journalists are not just trusted, certified financial advisers. They are experienced and leading influencers in the financial realm, trusted by millions to provide advice about money. We handpick the best of the best, so you get advice from real experts. Our goal is to educate and inform, NOT to be a ‘stock-picker’ or ‘market-caller.’ 

Why listen to what we have to say?

While Due does not know how to predict the market in the short-term, our team of experts DOES know how you can make smart financial decisions to plan for retirement in the long-term.

View our expert review board

About Due

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below… Learn More