What is Accumulated Amortization

Accumulated Amortization is the total of Amortization Expense already charged to expense against Intangible Non Current Assets. As it is a Contra Asset Account, so it is deducted from the Closing Balance of Intangible Assets on Balance Sheet in order to find the Book value or Net Relizable value of these assets.

Accumulated Amortization Journal Entry

You may also Read Out, “What is Accumulated Depreciation”

When amortization on Intangible Non Current Assets is charged, then following Accounting Journal Entry is Recorded in the Book of Company for Accumulated Amortization as shown below:

Accumulated Amortization Journal Entry

                               Amortization Expense a/c   XXX

                                                                     Accumulated Amortization a/c    XXX

(Amortization is Charged on Intangible Assets)

Example: Suppose, if Amortization on Trademark having Useful Life of 10 Years and Costing Rs. 500000, is applied at the rate of 10% by using Straight Line Method, then it can be calculated as follows:

Amortizable Cost = Cost - Residual Value  500000 - 0 =  Rs. 500000

Amortization Expense for the year = 5000000 X 10% = Rs. 50000

             Or 

Amortization Expense =  Cost - Residual Value / Useful Life = 50000 / 10 = Rs. 50000

Accounting Journal Entry For Accumulated Amortization is shown below:


                     Amortization Expense a/c - Trademark   50000


                                                           Accumulated Amortization a/c - Trademark   50000

(Amortization on Trademark Charged at the Rate of 10% On Cost For The Year)

Accumulated Amortization T Account is prepared to record Journal Entries related to it and Ending Balance is transferred to Balance Sheet to deduct it from the Closing Balance of Relevant Intangible Non Current Assets at the End of Accounting Period.

Is Accumulated Amortization Debit Or Credit?

The Normal Balance of Accumulated Amortization is Credit but when we need to close it, then we debit it.

Is Accumulated Amortization A Current Asset?

It is not a Current Asset, but a Contra Asset Account which is the reversal of relevant Intangible Non Current Asset and the Closing Balance of Accumulated Amortization is deducted from the Closing Balance of Relevant Intangible Non Current Asset on Balance Sheet.