Amortization & Goodwill in Accounting
The term Amortization is used to describe the write-off to cost expense of an intangible asset over its useful life. The usual accounting
entry for amortization consists of a debit to Amortization Expense and a credit to the intangible asset account.
|Amortization Expense||2300 $|
intangible asset account
There is no theoretical objection to crediting an accumulated amortization account rather than the intangible asset account, but this method is seldom encountered in practice.
Although it is difficult to estimate the useful life of an intangible such as a trademark, it is highly probable that such an asset will not contribute to future earnings on a permanent basis. The cost of the intangible asset should, therefore, be deducted from revenue during the years in which it may be expected to aid in producing revenue. Under the current rules of the Financial Accounting Standards Board, the maximum period for amortization of an intangible asset cannot exceed more than 40 years. The straight-line method normally is used for amortizing