Accounting Examples - Amortization Example

Online Course
Accounting for Non-Accountants - Accounting for Non-Accountants is a 20-hour strictly online accounting course that requires no textbook or live instructor. It is a self-paced accounting tutorial that can be taken 24/7 conveniently in your own home, office, or from any computer that has access to the Internet. Click here to view more details

Amortization

Amortization, like depreciation, is the process of deducting, over a set period of time, the costs incurred in the procurement of assets. Whereas depreciation is used to expense out (over the useful life) the costs of tangible assets such as buildings, furniture, and machines; amortization is used to recover the cost of intangible assets such as:

• Going into Business Costs - start up expenditures, cost of incorporating, etc.

• Lease for Business Property

• Goodwill, patents, customer base, permits, etc.

• Reforestation Costs - direct costs of planting or seeding

• Pollution Control Facilities

When the intangible asset is originally purchased the cost should be debited to an asset account. This cost is then "written off" or amortized, generally using the straight line method, over the legal useful life of the asset (see IRS Publication 535 Chapter 9 for amortization period guidelines). The straight line method is simply dividing the initial cost of the asset by its useful life. For example if a patent is purchased for $12,000 and amortized over 15 years (180 months) then the monthly write-off would be $66.67 (12,000/180).

General Journal

Page: 1

Date

Account Titles/Explanation

Ref

Debit

Credit

20XX
Jan

Amortization Expense - Patents

Patents

55
14

66.67

Get ALL of the materials above for only $35.

Master Accounting Download Package - High-quality PDF files
Accounting explained in a clear and easy to understand way. Includes explanations for 31 accounting topics, 16 Accounting Exams (40 questions each), 52 Printable Crossword Puzzles, 175 Question Bookkeeping Test, Quick View Basic Accounting "Cheat Sheet", Accounting Dictionary and more. Click here to view more details

Managerial & Cost Accounting Exams - covering 19 managerial accounting topics (a total of 520 questions). Answers included. A great tool for learning and reviewing!

Download Printable (PDF) - $15

Financial Accounting Exams - covering 16 financial accounting topics. Each authentic accounting exam contains 40 questions focused on each topic (a total of 640 questions). Answers included.

Download Printable (PDF) - $15

Amazon.com
Popular books for Amortization

Monthly Interest Amortization Tables

Loan amounts of $50 to $300,000. Interest rates of 2% to 25.75%. Terms up to 40 years.