Ammortisation

Question

Hello, 
 I have just finished the tax return for 2017 and was wanting to enter the ammortisment for a chair and a computer but am extremely confused. 
 Originally i entered the general journal as follows: 
 Bank CR 
 Acc 1820 DB 
 TPS paid DB 
 TVQ Paid DB 
 
 How do i make adjustments so that it is correct and that the money shows as coming from the bank, i understand that it should be : 
 ACC 1820 original cost DB 
 Acc 1825 Amount of ammortisment CR 
 
 Also I have entered an amount previously when i enterend the history originally in acc 1910 and 1915 but need to clear it as it shouldn't have been entered. 
 Kind Regards, 
 Nicole

Alwyn · Accepted Answer

To record amortization amounts you will require two accounts.Based on the information shown it would appear as account 1825 is the account to accumulate the amortization each year. The second account is an Amortization Expense account (5xxx). Then your entry would be Dr 5xxx and Cr 1825 for the amount of the amortization. Each year account 1825 will increase until at some point it will equal account 1820 which will always show the original cost of the items included. Most financial records would show a sub-total account providing the net amount of 1820 and 1825. 
 Amortization funds do not come from the bank. This is a non-cash entry used to record a cost of using a large cost item without having to expense the item in a single accounting period.

Alwyn · Answer

Sorry, Nicole, I thought you had this entry already made. The first entry, at the time of purchase, would be a credit to the bank with the balancing debit being the Fixed Asset account for Furniture and Fixtures. If taxes are paid the debit would be to the respective tax accounts involved. 
 The entry would be: 
 1060 Bank - Cheque CR 12,000.00 
 1820 Furniture and Fixtures DR 10,485.00 
 2310 TPS Paid on Purchases DR 524.00 
 2315 TVQ Paid on Purchases DR 991.00 
 The amortization entry at the end of the year would be similar to: 
 5795 Amortization DR xxx.xx 
 1825 Accum Amort F & F CR xxx.xx 
 All account numbers have to be adjusted to your chart of accounts and dollar values are fictitious for this example. 
 I hope this helps

Sage 50 Canada

Ammortisation

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