What are the difference between Amortisation & Write off balances?
tarak nath shaw (Audit Clerks) (45 Points)
20 November 2010What are the difference between Amortisation & Write off balances?
Suresh Prasad
(www.aubsp.com)
(15630 Points)
Replied 21 November 2010
This May Help You---------------
1. Accounting: Preferred term for the apportionment (charging or writing off) of the cost of an intangible asset as an operational cost over the asset's estimated useful life. It is identical to depreciation, the preferred term for tangible assets. The purpose of both terms is to (1) reflect reduction in the book value of the asset due to usage and/or obsolescence, (2) spread a large expenditure proportionately over a fixed period, and thereby (3) reduce the taxable income (not the actual or cash income) of a firm. In effect, it is a process by which invested capital of a firm is recovered by gradual sale of the firm's asset(s) to its customers over the years.
2. Banking: Gradual repayment of a loan in equal (or nearly equal) installments which include portions of interest and principal amounts. See also level payment amortization.
Write off: :
Removal(Physical separation of an item from its original location or position) of the book value of a destroyed or obsolete asset, or an uncollectible sum, from the account books by reducing it to zero. The amount written off is charged against the earnings as an expense or loss.
Kumar
(CA)
(666 Points)
Replied 21 November 2010
I agree with Suresh
1. Amortization is used with respect to INTANGIBLE FIXED ASSETS or LOANS
Write-off is a term used for Other Assets such as Receivables, Inventory, Loans & Advances etc.
2. Amortization means regular debit to P&L A/c
Write off is a one-time transaction
3. Accounting policies w.r.t. Amortization needs to be disclosed in the financials as required under AS-26. Write off amount alone needs to be presented in the financials.
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