What is the meaning of pro rata?
Pro rata is a Latin term that means in proportion. Pro rata is related to prorate, a term used in cost accounting.
To illustrate the term pro rata, let’s assume that a company’s standard costing system has an unfavorable materials price variance of $400,000. If that amount is significant, the company will prorate the $400,000 to its inventory and to its cost of goods sold. Let’s also assume that the proration will be based on the company’s $1 million of standard materials costs in its inventories and $9 million of standard materials costs in its cost of goods sold. On this basis the inventories’ pro rata share of the variance will be $40,000 ($1 million divided by the total of $10 million = 10% times the $400,000 variance). The pro rata share of the variance assigned to the cost of goods sold will be $360,000 ($9 million divided by $10 million = 90% times the $400,000 variance).
Learn more about Standard Costing.
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hello sir,
this is jai soni
& want to know that how to make the entry of income tax paid in advance & all entries related to income tax
can i get your monthly question & answers in pdf format
thatnk you
In analylising transations there might be omissions made by the Accountant because he did not see an invoice but there was a transaction.So in this case what is to be done for the adjustments?