When a company records amortization expense it debits:
A)liabilities and credits expenses.
B)expenses and credits cash.
C)expenses and credits a contra-asset account.
D)long-lived assets and credits expenses.

Question

Quizplus · Accepted Answer

Amortization expense is the systematic allocation of the cost of an intangible asset over its useful life. It is recorded by debiting expenses and crediting a contra-asset account (accumulated amortization) to reduce the carrying amount of the intangible asset on the balance sheet. This is because the intangible asset is not physically consumed, but rather its value diminishes over time as it provides benefit to the company. Therefore, the contra-asset account reflects the portion of the asset that has been used up and the remaining balance is still reported on the balance sheet as the carrying value of the intangible asset.

When a Company Records Amortization Expense It Debits