Definition of tracing

assignment of cost to an activity or a cost object using an observable measure of the consumption of resources by an activity. Tracing is generally preferred to allocation if the data exists or can be obtained at a reasonable cost. For example, if a company's cost accounting system captures the cost of supplies according to which activities use the supplies, the costs may be traced (as opposed to allocated) to the appropriate activities. Tracing is also called direct tracing. The 1998 draft also defines cost tracing broadly as the ability to assign a cost to a cost object. Thus, it treats assignment and tracing as synonymous.