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Describe the term amortisation in finance and accounting.
61 Lectures 1 hours
43 Lectures 33.5 hours
Amortisation means distribution of cost of intangible asset over a periods of time. Only intangible assets (assets which don’t have physical existence) are amortised, tangible assets (assets which have physical existence) can’t be amortised.
Steps to record amortisation in a journal are as follows −
- Identify initial value of the asset.
- Life span of the asset.
- Residual value.
Formula to calculate is − amortisation expenses = (initial value-residual value)/lifespan
Advantages of amortisation are −
- Reduces tax burdens.
- Firms can show higher value of an asset.
- Firms can show more income in financial statements.
Amortising intangible assets includes −
- Note the starting date.
- Calculate initial cost.
- Estimate life span.
- Calculate amortisation value per year.
Recording the amortisation includes −
- Make an entry in firm balance sheet.
- Maintain its records.
- Never undervalue intangible assets.
- Describe the term journal in accounting.
- Describe about bank reconciliation concept in accounting & finance
- Explain accounting period in finance and accounting.
- What is payroll accounting in finance and accounting?
- Differentiate between finance and accounting.
- Describe about systems of accounting.
- Describe the different types of companies in finance.
- What are the sources of fund in finance and accounting?
- What is accounting cycle in finance?
- What are the differences between short-term and long-term finance functions or decisions?
- Compare depreciation and amortisation.
- What is matching concept in finance & accounting?
- What is dual aspect concept in accounting & finance?
- Write the difference between domestic finance and international finance.
- Differentiate between the long-term, short-term, and medium-term schedulers.