Amortization
In accounting, amortization means spreading the cost of a finite-lived intangible, a prepaid or a debt discount over the periods it serves.
- Layer
- Lexicon
- Defined in
- Lexicon
- Components
- 2
Authority
This definition follows ASC 350-30-35 (intangibles), ASC 340-10 (prepaids).
Every citation in this system, with the text we read and the date we checked it, is in US GAAP and where these rules come from.
The lesson that teaches this
Accounting, 0 to 1 — a free course taught end to end on one month of one company, with the spreadsheet exercises to work it yourself.
Amortization, in use
Quoted from the 3 documents that use the word — what it does to an interface, in the spec's own sentence.
It usually means an amortization entry was missed.
Templated by adjustment type — accrual, deferral, depreciation, amortization, provision, reclass, true-up. autoReverse defaults to true for accruals, with the reversal date shown inline ("Reverses 1 Oct 2026").
D&A on the cash flow ties to the depreciation and amortization posted in the period.
For founders
The same idea written for a founder: what it costs a startup that ignores it, and what to do in a real month.
- Contract costsCosts you pay only because a customer signed, usually sales commissions, are capitalized and expensed over the period the contract benefits you. That period can include renewals you expect.
- Capitalized softwareSome costs of building software you use to run your business, including a SaaS platform customers access but don't take possession of, are recorded as an asset and amortized once it's ready to use.
What it is not called
Each of these is a real word for a different thing. Using it here is what makes a product read as though it was built by someone who has not done the work.
- depreciation
Components that render this
The concept is not documentation-only. These are the components that name it in their specification, grouped and stated exactly as the catalog states them.
Also in Foundations
Work with this concept
The calculators that compute it and the ledger payloads that carry it. A definition is where a reader starts; these are where they go next.
- Prepaid & deferred releaseA premium paid on the 17th does not release in twelve equal slices. Day-weighted, or even — your call.Tool
- Depreciation vs amortizationDepreciation spreads the cost of a tangible asset over its useful life; amortization does the same for an intangible asset — and, in loans and prepaids, for the paying down of a balance over time.Compare
- Journal entry for prepaid insuranceWhen the premium is paid, debit Prepaid insurance and credit Cash. At each month-end, debit Insurance expense and credit Prepaid insurance for the month's share of the policy, until the prepaid balance reaches zero.Entry
- Journal entry for capitalized softwareCapitalize qualifying development cost by debiting Capitalized software and crediting the expense it was first booked to (usually wages). Once the software is ready for use, debit Amortization expense and credit Accumulated amortization each month over its useful life.Entry
- Journal entry for a finance lease under ASC 842At commencement, debit Right-of-use asset and credit Lease liability for the present value of the payments. Each payment debits Lease liability and credits Cash; each month-end debits Interest expense and credits Lease liability for the interest, and debits Amortization expense and credits the right-of-use asset for straight-line amortization.Entry
Defined in Lexicon. This page is generated from that document, so the two cannot disagree.