Proration definition
/What is Proration?
Proration can refer to two situations in business, which is 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 can also 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.