What is Appropriation?

Appropriation meaning refers to the money that is kept aside for future use or certain purposes. All kinds of businesses, including small-scale and large-scale organizations, keep a specific amount of money aside just so they can use it for future events. The delegation of money for such purposes is known as appropriation.

Not only businesses, but the government also appropriates money. The business might decide to appropriate funds for a variety of reasons, including employees’ wages and salaries, research and development projects, and other such short as well as long term requirements.

How does Appropriation Work?

Appropriation is commonly used in Accounting. It gives you a brief of the money allocation and the details of how much amount is allocated to different future requirements. Note that appropriation occurs for both government and commercial companies. For example, the government of the United States appropriates money for different programs annually. Appropriation is not confined to cash, but other assets that could be useful for future events can also be appropriated. For example, the government can put Land or certain machinery aside for future requirements. A company can buy land and save it for building a park and other entertainment areas in the future.

As mentioned earlier, the appropriation accounts for the United States’ government are handled by Congress. In the US, the Fiscal Year is from 1st October to 30th September every year. In every fiscal year, Congress asks the president of the States to send a budget proposal. The Congress committee goes over the plan and then creates a budget resolution to determine how the money will be spent on future events. The resolution plan is mainly used to assign a particular amount of money to different committees. Now, these committees further divide the given amount to the subcommittees. Some of the main departments that receive the allocated money include the Department of Commerce, Labor, Transportation, Defense, Energy, and Agriculture.

Government and Commercial Appropriation

While each department gets its share of appropriated amount, medical and social security sectors get funds via the automatic formula. These fields are counted in the compulsory expenditure category and are thus funded automatically, instead of through the money allocation process. The US Congress also reserves money for special or emergency future events that may require urgent funding. This includes natural calamities, economic depression, and other unexpected disasters. In 2014, the US Congress launched the 2015 Appropriation Act, in which, the government agreed to save up to $5.2 billion to deal with the Ebola virus that was spreading rapidly in West Africa.

The amount was allocated as the emergency response to the virus and the uncertainties associated with the disease. The appropriation act was mainly established to develop treatments for people getting infected with the virus. Companies appropriate their funds for dividends, Investing in fixed assets, and re-paying debts. How a company allocates its resources play a crucial role in determining the success and growth of the firm.