Amortization of expense/income
This query is : Resolved
25 October 2010
what do you mean by amortization of expense/income in accounts? Please explain.
Regards
Devendra
Regards
Devendra
25 October 2010
Charging to P/L account in more than one accounting year.
27 October 2010
Hi Devendra... Amortisation means
1. The paying off of debt in regular installments over a period of time.
2. The deduction of capital expenses over a specific period of time (usually over the asset's life). More specifically, this method measures the consumption of the value of intangible assets, such as a patent or a copyright. Investopedia explains Amortization
Suppose XYZ Biotech spent $30 million dollars on a piece of medical equipment and that the patent on the equipment lasts 15 years, this would mean that $2 million would be recorded each year as an amortization expense.
While amortization and depreciation are often used interchangeably, technically this is an incorrect practice because amortization refers to intangible assets and depreciation refers to tangible assets.
1. The paying off of debt in regular installments over a period of time.
2. The deduction of capital expenses over a specific period of time (usually over the asset's life). More specifically, this method measures the consumption of the value of intangible assets, such as a patent or a copyright. Investopedia explains Amortization
Suppose XYZ Biotech spent $30 million dollars on a piece of medical equipment and that the patent on the equipment lasts 15 years, this would mean that $2 million would be recorded each year as an amortization expense.
While amortization and depreciation are often used interchangeably, technically this is an incorrect practice because amortization refers to intangible assets and depreciation refers to tangible assets.
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27 October 2010
Just to summarise every thing....
Amortisation means nothing but Prepaid Expense / Income which we studied in BCOM
Amortisation means nothing but Prepaid Expense / Income which we studied in BCOM
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