Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 9 - Reporting and Analyzing Long-Lived Assets - Questions: 15

Answer

Depreciation is the process of allocating to expense the cost of plant asset over its useful life; similarly amortization is the process of allocating to expense the cost of intangibles.

Work Step by Step

However, the difference between the two is, to record amortization of an intangible asset, a company increases amortization expense, and decreases (credits) the specific intangible asset. Unlike Depreciation, no contra account, like accumulated depreciation expense is prepared.
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