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Allowance is a provision to allow for deviation between an actual dimension and an ideal dimension.

For example, suppose you need a hole for a 1/4" bolt. It is a common error to simply draw a 1/4" circle. Unfortunately you may receive your machined parts and find the bolt does not fit! The reason? No hole is exactly 1/4" – all manufacturing processes have variation and this is controlled by tolerance. If the tolerance is +/- .01" and the hole is at the low limit of .25 – .01 = .24, the bolt may not fit. To prevent this draw the circle at diameter .26. Then the low limit will be .26 – .01 = .25 which would clear a 1/4" bolt.

Similarly a 1/4" shaft that must fit inside a 1/4" hole should be designed to be sure the shaft can be inserted. For example, if tolerance +/- .005 is used for the shaft and hole and you set the shaft to .245 and hole to .255, at the tolerance limits the actual shaft could be as large as .250 and the hole as small as .250 so they will still fit. However such a fit might be tight so you might add .001 or so to the hole or subtract from the shaft to insure that the fit is loose. Then you would specify a shaft of .244 and hole of .256. You should also think thru the opposing limits. The hole could be as large as .261 and shaft as small as .239 leaving a gap of .022. If that is too loose you would need to tighten the tolerances.

The foregoing are just simple examples. You, the designer, are responsible for allowances, to be sure your parts fit and work properly.