<b>Assessment</b> is method of allocation of cost at period end, from one cost center (the sender cost center) to one or more cost centers (the recieving cost centers) who recieve the services of the sender cost center.
Let us take an example; A company has Admin, Sales, Purchasing departments and a Cleaning department. The cleaning department, does cleaning services to the other three departments in the company. The cleaning department wants to charge the cost of cleaning (viz. the cost incurred in its department) to the receiving departments viz Admin, Sales and Purchasing at the period end.
Now in that period, the sender cost center (the cleaning department) would have incurred costs within in its cost center under various head, like salary, maintenance supplies, & Depreciation. If we take a look at the report on, cost of the cleaning department, it will have various primary cost elements (cost incurred from external services) as mentioned above.
Now we need to allocate these cost to the recieving cost centers (Admin, Sales and Purchasing). You have a choice, either to individually split the salary, maintenance supplies and Depreciation cost to the recieving departments or to sum up all the costs, incurred under various cost elements like salary, maintenance supplies and depreciation and charge the receiving cost centers under one head called "Cleaning Cost". If we do it by the first described method it is called <b>Distribution </b> and if we do it by the summarized method, it is <b>Assessment method</b>.
The "Cleaning Cost" will need to be created as the secondary cost element of type Assessment (type 42), because this is an example of internal service and not an external service. (External services are associated with primary cost element)
The <b>cleaning cost center</b> will have it cost report as follows (e.g)
Salary (primary cost element) $50,000
Maintenance Supplies (primary cost element) $20,000
Depreciation (primary cost element) $10,000
-
Total $80,000
Cleaning cost (secondary cost element) -$80,000
(Assessment) -
Net Total for the period $ 0
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The recieving cost centers will have a one line debit in their respective cost centers towards Cleaning cost with their portion.
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