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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Amortization
Hello John. Could you please help me with these points of mine?
i) Is it correct that both depreciation and amortization is when the asset value is reduced by use of them over the period?
ii) Depeciation is used for Tangible assets like NCA or Fixed assets
iii) Amortization is used for Intangible assets like Goodwill, Research and Development etc.
iv) The Journal entry for depreciation is:
DR depreciation expense
CR accumulated depreciation
v) The Journal entry for amortization is:
DR amortization expense
CR accumulated amortization
vi) Amortization expense will go to SOPL (similarly depreciation expense) whereas Accumulated amortization will reduce the asset value in SOFP (similarly accumulated depreciation)
What you have written is correct.
Amortisation and depreciation both mean the same thing – it is just that we use the word amortisation when it is goodwill etc..