Allowance is defined as an amount of money which has been budgeted or allotted for a specific purpose. The type of allowance varies with different purposes. For example: an accounting allowance could be used as an expense such as a business trip or office supplies. In addition, an allowance could be deducted from an invoice as an incentive for a large order, or compensate the buyer for an expense or mistake. A company may have an allowance for estimating time or material for production.