Appropriation Account
Categories: Accounting
Appropriation is the formal process that companies and other larger organizations use to set aside money for a particular purpose (See: Appropriation). The appropriation account is basically what this setting aside looks like on paper.
Once the appropriation is decided, the money is put into its proper appropriation account. But taking this action doesn’t necessarily mean the funds get moved to an actual separate account.
Appropriation accounts often exist as a construct...on paper only...rather than needing to have a literal bank account attached to it. Like if you have $100 in your wallet, with $10 earmarked for a burrito for lunch. You don't have to take the $10 out of your wallet and put it in some glass case marked "burrito." It's enough to just know it is appropriated for burritos.
However, if your accountant insisted on creating a spreadsheet detailing your financial situation, including the contents of your wallet, the $10 might have a line item for "Burritos, near-term." That line item would be the appropriation account for that burrito (with most of your future earnings in the appropriation account labeled "burritos, long-term").
