A Quick Way to Learn about “What Is Amortization In QuickBooks?”

Amortization is basically a technique which is used from time to time to lower the book value of an intangible asset over a certain period of time. This technique helps companies to cover their operating cost while they can utilize and make money of what they are paying back.  “What Is Amortization In QuickBooks” you ask! If you are running a small and medium-size business organization, then you must be aware of the term “Amortization” while struggling with your expenses, assets and cash flows.

In this article, we are going to talk about what is Amortization in QuickBooks and why to use it. The simple answer of “What” & “Why” will solve all your doubt related to Amortization. We only recommend you to read this article until the end, so that you would be able to understand the in-depth details.

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What is Amortization in QuickBooks? “In Layman’s Term”

When you are running a small and medium-size business, then your company’s tangible or intangible assets loses its value over a period of time. You can measure those loses, which impacts your company’s accounting operations. The Amortization is an accounting term which is used to describe the act of spreading the cost of intangible assets over a period of time with step-by-step monthly payment.

There are two types of Amortization in accounting one is for loans and another for intangible assets.

Amortization in QuickBooks helps to cover the operating cost of the companies over time while the company is still able to utilize the money and make money of what they are paying off. The Amortization simply refers to distributing the payments in other installments, including both principal amount and interest amount until the loan amount is fully paid off.

What type of Account is Amortization In QuickBooks?

  • Amortization is registered by setting up a sub or contra-account under your Main asset called Accumulated Amortization.
  • To create an account for the loan, you need to set up individual accounts for interest expense and escrow.
  • Amortization also means the repayment of the principal loan over a specific period of time.

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What type of Account is accumulated Amortization In QuickBooks?

The accumulated amortization account is a contra asset account that is used to lower the accounting value of the intangible assets reported on the balance sheet at the initial cost.

How to set up Accumulated Amortization In QuickBooks?

Follow the steps given below to set up accumulated Amortization in QuickBooks.

  • At first, Go to the List and select Chart of Accounts.
  • Now click on Account and click New.
  • You must set up three accounts for an intangible asset- asset account, accumulated Account, and amortization expense.
  • To proceed, choose Fixed Asset and Continue button.
  • You must type a suitable name for the Account.
  • For better insight, enter a description for the Account.
  • Accept Unassigned for the tax-line mapping. \
  • After that, click on the Save & New button.
  • To proceed, you must change the account type to Expense.
  • Now, give a name for the Account and make sure to add further description to your amortization expense account.
  • Again, you must select Unassigned for the tax-line mapping.
  • Finally, click Save and Close to finish the task.
  • Now, you need to create an intangible asset when you know what type of Account is Amortization in QuickBooks.
  • To create intangible assets, you need to choose the module that how you are paying for the intangible assets.
  • Once you have created the Account and intangible assets than you can easily record amortization journal entry in your amortization expense account

Wrap it up

In this article, we have briefly explained: “What Is Amortization In QuickBooks”. After reading this article, you must be able to understand how to set up accumulated Amortization In QuickBooks.

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