Concept of amortization is ” You incurred expense and your expect that it will give economic benefit to the company over several months or period, therefore should be charge in those period” . It follows ” Matching principal ”
It depends what account your amortizing. Journal Entries varies according to situation . There is no hard and fast rule to follow.
Examples of amortization include but not limited to : Shares issued at discount , Shares issued at premium , Preliminary expenses ( Company incorporation expense), Prepaid Expenses , Deferred income etc.
Debit -Amortization Expense
Credit – Accumulated amortization
T E | Feb 26, 2010 | Reply
Concept of amortization is ” You incurred expense and your expect that it will give economic benefit to the company over several months or period, therefore should be charge in those period” . It follows ” Matching principal ”
It depends what account your amortizing. Journal Entries varies according to situation . There is no hard and fast rule to follow.
Examples of amortization include but not limited to : Shares issued at discount , Shares issued at premium , Preliminary expenses ( Company incorporation expense), Prepaid Expenses , Deferred income etc.
Entry can be :
Scenario – 1
Amortization Expense – Debit – XXX
Preliminary expenses – Credit – XXX
Scenario – 2
Deferred Income – Debit – XXX
Deferred amortization Income – Credit – XXX
Please note that , in Scenario 2 we are recognizing Income in Profit & loss Account.
Cheers
Bayzz | Feb 28, 2010 | Reply
Answer:
You have two choices:
Let us cite Patent account as an example.
First. You may want to maintain an Accumulated Amortization account to monitor the accumulated amount you already amortized:
(Dr) Amortization expense $xxx
(Cr) Accumulated amortization – Patent $xxx
Second. You may want to credit directly your asset account:
(Dr) Amortization expense $xxx
(Cr) Patent $xxx
EJ (Philippines) | Mar 3, 2010 | Reply