In accounting, the entry for amortization is a standard adjusting Catering Noida made at the end of a period (monthly or annually). Its purpose is to recognize the "consumption" of an intangible asset and match that cost against the revenue it helped generate.
Because amortization is a non-cash expense, you aren't writing a check; you are simply moving value from your Balance Sheet to your Income Statement.
Why this entry?
Debit Amortization Expense: This increases your expenses on the Income Statement, which reduces your taxable net income.
Credit Accumulated Amortization: This increases a "contra-asset" account on the Balance Sheet. It sits directly underneath the original asset (like a Patent or Software) to show how much of its value has been "used up" so far.
A Practical Example: The $50,000 Software License
Imagine your company buys a specialized software license for $50,000 with a 5-year useful life and no salvage value.
Calculate the yearly amount: $50,000 \ 5 \ years = $10,000 \ per year
How it looks on your Balance Sheet (Year 1):
The asset doesn't just disappear; it is "netted" against its accumulated amortization:
Intangible Asset (Software): $50,000
Less: Accumulated Amortization: ($10,000)
Net Book Value: $40,000
The "Direct" Method (Alternative)
In some simpler accounting setups, instead of using an "Accumulated Amortization" account, the credit is applied directly to the asset account.
While this is easier, the Accumulated Amortization method is preferred by most professionals because it keeps a record of the original cost of the asset visible on the books, which is helpful for audits and tax tracking.
