Amortisation - Intangible Assets
Also called: Amortisation Expense
The monthly charge that spreads the cost of Software or other intangibles over their licence life, on the Profit and Loss statement.
In detail
Amortisation is depreciation for assets you cannot touch: a booking system licence, a website build, a brand or goodwill from buying another business. The cost is spread over the licence period or the expected useful life, and each period's charge debits this ledger and credits Accumulated Amortisation. In BRAccount an intangible is an Asset under a category pointing to Software or Goodwill with this ledger as the expense account, so the schedule posts the Depreciation Entry on its own. Goodwill under NFRS is not amortised but tested yearly for impairment, so only licence-type intangibles use this account in practice. The Income Tax Act allows intangibles to be depreciated over their legal life, so book and tax usually agree here.
Formula
Monthly amortisation = Cost of the intangible / Useful life in months
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Amortisation - Intangible Assets | Rs 3,333 | |
| Accumulated Amortisation | Rs 3,333 |
How to record it in BRAccount
- 01Go to Assets > Asset Category and create or check a Software category pointing to this ledger.
- 02Post the licence Purchase Invoice with Is Fixed Asset ticked and the Software asset account.
- 03Open Assets > Asset, set the licence period as useful life and submit.
- 04The Asset Depreciation Schedule posts the monthly entry; the entry below posts.
- 05Review the remaining value on Financial Reports > General Ledger before renewing the licence.
When to use it
Posted by the depreciation Journal Entry from the intangible Asset's schedule.
Example from the demo books
Dr Amortisation - Intangible Assets Rs 3,333, Cr Accumulated Amortisation Rs 3,333 for one month of the Rs 1,20,000 booking system licence.