What does amortization mean?
In accounting we use the word amortization to mean the systematic allocation of a balance sheet item to expense (or revenue) on the income statement. Conceptually, amortization is similar to depreciation and depletion. An example of amortization is the systematic allocation of the balance in the contra-liability account Discount of Bonds Payable to Interest Expense over the life of the bonds. (The accountant credits Discount on Bonds Payable and debits Bond Interest Expense with a portion of the balance each accounting period.) In the case of a premium on bonds payable, each accounting period the accountant will systematically move a portion of the balance in Premium on Bonds Payable by debiting the account and crediting Interest Expense.
Amortization also applies to asset balances, such as discount on notes receivable, deferred charges, and some intangible assets.
Amortization is a term used with mortgage loans. For example, a mortgage lender often provides the borrower with a loan amortization schedule. This schedule lists each loan payment during the life of the loan, the amount of each payment that is for interest, the amount of each payment that is for principal, and the principal balance after each loan payment. The loan amortization schedule allows the borrower to see how the loan balance will be reduced over the life of the loan.
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how do you treat other information in relation to the trial balance,balance sheet and income statement.example,if a figure is given in the trial balance say for prepayments and another amount is given in the additional information.how do you treat the two in the balance sheet and income statememt.please help
Amount given in additional info should be deducted from the prepaid amount mentioned in the trail balaance and the balance remaining amount is shown as expenses in income statement.
In Balance sheet, prepaid expenses in additional info is shown on asset side
what is the difference between accounts payable and notes payable?
An accounts payable is a business or trade payable - amounts owed to vendors or creditors - that result from the daily business transactions. The name of the accounts payable account is called “Accounts Payable”, generally, or can be broken into separate accounts that are labelled more specifically by vendor or creditor, such as “Accounts Payable - ABC Company.” Notes payable refers to the amount owed to a bank or an individual that is specifically backed by a written promissory note - hence, the term “note” payable. The name of the notes payable account that represents a note owed to Bank ABC is called “Notes Payable - ABC Bank”. The name of the notes payable account that represents a note owed to John Smith is called “Notes Payable - John Smith”. Both accounts payable and notes payable are found in the liability section of the balance sheet.
Is goodwill amortized?