I posted a question a while ago, I was hoping someone would get back to it? Its not a difficult question, I'm just unsure whether to debit or credit accumulated amortization. This is for march 31 and the adjustment is 100 of amortization. What do I do?
To determine whether to debit or credit accumulated amortization, you need to understand the general concept of amortization and its impact on financial statements.
Amortization is the process of allocating the cost of intangible assets over their useful life. It is similar to depreciation but specifically applies to intangible assets such as patents, copyrights, and software. The accumulated amortization account tracks the total amortization expense during the asset's life.
Typically, accumulated amortization is a contra-asset account, meaning it has a credit balance. It offsets the intangible asset account on the balance sheet. As the intangible asset is amortized, the accumulated amortization account increases. This reduction in value reflects the portion of the asset that has been used up or expired.
Now, let's apply this understanding to your specific scenario. Based on the information you provided, the adjustment for March 31 is $100 of amortization. To record this adjustment, follow these steps:
1. Determine the current balance in the accumulated amortization account. Suppose the current balance is $500.
2. Calculate the new balance after the adjustment by adding the $100 amortization expense. The new balance would be $500 + $100 = $600.
3. To increase the accumulated amortization account, you need to credit it since it is a contra-asset account. Credit the account with $100.
The journal entry to record the March 31 adjustment for amortization would look like this:
Debit: None
Credit: Accumulated Amortization $100
By crediting the accumulated amortization account, you are increasing the balance to reflect the additional amortization expense for the period. Keep in mind that it's always a good practice to consult with an accountant or review your specific accounting guidelines before making any journal entries.