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January 4, 2008

What is net of accumulated amortization?

Net of accumulated amortization usually refers to the amount of an intangible asset or a deferred charge that has not yet been expensed. Amortization is a concept similar to depreciation.

To illustrate net of accumulated amortization let’s assume that five years ago a corporation incurred bond issue costs of $600,000 when it issued $50,000,000 in bonds that would mature 20 years later. The $600,000 is a deferred charge because it will be amortized to expense over the 20-year life of the bonds. Annually $30,000 ($600,000 divided by 20 years) will be debited to expense such as Bond Issue Expense or Amortization Expense and will be credited to Deferred Bond Issue Costs or Accumulated Amortization of Bond Issue Costs. After five years, the bond issue cost net of accumulated amortization will be $450,000. This is the original $600,000 of cost minus $150,000 of accumulated amortization (5 years X $30,000 per year).

Learn about Depreciation.

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About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

He is the author of the 2010 Master Accounting Download Package which has been praised for it's ability to simplify accounting in a way that anybody can understand.



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Comments

6 Responses to “What is net of accumulated amortization?”

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