General II

Question 1

What is Amortization?

Answer 1

The spreading out of capital expenses for intangible assets over a specific period of time (usually over the asset’s useful life)

Question 2

What is Accumulated Depreciation?

Answer 2

the total amount of depreciation for a fixed asset that has been charged to expense since that asset was acquired and made available for use.

Question 3

Why is accumulated depreciation an asset account?

Answer 3

Having an asset account such as Accumulated Depreciation allows a company’s balance sheet to easily report both 1) the amount of an asset’s cost that has been depreciated as of the date of the balance sheet, and 2) the asset’s cost. This is possible because Accumulated Depreciation is credited each time that Depreciation Expense is debited. Since Accumulated Depreciation will have a continually increasing credit balance it is referred to as a contra-asset account .