Wednesday, June 13, 2012

Calculate Recharge Rate

What are Recharges?

In accounting terms, recharges are a type of charge to specific departments for goods and services that they provide the company internally. These recharges are treated like income by the department providing the good or service.

However, recharges are not for profit. The internal rates equal the recovery of costs incurred in providing the good or service to the other department.

Recharge Rate= Original Cost + expense to provide good/service

When recharges and expenses are totaled across, the net effect is the original cost.  This avoids double recording of cost: once when purchased and again when sold internally. Thus, the recharge rate is very important to proper accounting within a company.

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