We don't get this one too often, but it can be a bit confusing if it comes up for a treasurer to explain to the club why one expense (equally allocated) subtracts units from a member's Paid In Plus Earnings while another (by percent ownership) does not.
When you record an expense, assets leave the club, and the club value thus decreases. The decrease in club value means that the value of each individual member also decreases. The decrease in club value can be allocated among members two ways - either equally, where each member's value decreases by the same amount, or by ownership share, where the decrease in each member's value corresponds to the member's ownership percentage.
Traditionally, allocating expense by ownership share was the only available option. Accounting for this type of expense is quite simple and straight-forward. Each member keeps the same number of units, and the value of the unit decreases, thus each member's value decreases proportionately to the number of units the member owns. When allocating expenses equally, on the other hand, we deduct the same number of units from each member, while keeping the value of the unit the same. Thus each member's value decreases by the same amount. People are often alarmed by the fact that equally allocated expenses take away units from members. This is OK. In fact, removing the same number of units from each member while keeping the unit value constant is the only way to ensure that the expense is equally allocated. Remember that the valuation unit is merely an abstract club accounting concept that is used to determine the member's dollar value and ownership percentage in the club.
Let us illustrate with a simple example the differences between the two methods of expense allocation. Take a club with only 2 members, John and Jane. Let's say the club has total value of $1,000.00. The unit value is $10, so there is a total of 100 units in the club. Let's say that John has 25 units (his value is $250.00) and Jane has 75 units (her value is $750.00). John and Jane's respective ownership shares are 25% and 75%. Now, let's say there is an expense of $100. If we're allocating the expense by ownership share, things just sort of work out - $100 is deducted from the club's cash; the total value of the club decreases from $1,000.00 to $900.00. Since there are still 100 units in the club, the unit value decreases to $9.00 per unit ($900 total value / 100 total units). Although each member still has the same number of units, the unit value is different, so the individual members' value has changed. John's value is now $225 ($9.00 per unit * 25 units), and Jane's value is now $675 ($9.00 per unit * 75 units). Note that John's value decreased by $25 ($250 to $225), and Jane's value decreased by $75 ($750 to $675). The total amount of the expense, $100, was allocated to the members according to their ownership percentage.
Now, if we wanted to allocate the expense EQUALLY between the two, the only way to do this is to deduct an equal number of valuation units from each member. At the time of the expense, the unit value was $10 per unit. The total expense is $100, which equals 10 units. To allocate the expense equally, we subtract 5 units from each member. As a result, the club still ends up with a value of $900.00, but the total number of units is now 90. The value of the unit remains at $10. John now has 20 units, so his value is $200.00; Jane has 70 units, so her value is $700. The expense was allocated equally by decreasing each member's value by $50.
The important difference here is that with regular expenses, members keep their number of valuation units, but the unit value goes down, and each member's value decreases proportionately to their holdings. With equally allocated expenses, each member's number of units goes down by the same amount, but the value of the unit remains constant, thus each member's value decreases by the same amount.