Amortization Schedule

An amortization schedule is a financial statement that tracks the gradual reduction of a long-term asset’s cost over its useful life. It is used to account for the depreciation of assets that are not purchased for cash, such as equipment, vehicles, and intangible assets.

Format of an Amortization Schedule:

Amortization Schedule for [Asset Name]

Year | Beginning Balance | Amortization Expense | Ending Balance |—|—|—|—|— | — | — | — |

Key Components of an Amortization Schedule:

• Beginning Balance: The cost of the asset at the beginning of the year.
• Amortization Expense: The portion of the asset’s cost that is being amortized away in the current year.
• Ending Balance: The remaining balance of the asset at the end of the year.

Amortization Method:

Assets are depreciated using a specific method, such as straight-line depreciation, accelerated depreciation, or units-of-production depreciation. The depreciation expense is calculated based on the asset’s cost, residual value (if any), and the depreciation method.

Example:

Amortization Schedule for Equipment

Year | Beginning Balance | Amortization Expense | Ending Balance |—|—|—|—|2023 | $10,000 | $2,000 | $8,000 |2024 | $8,000 | $1,600 | $6,400 |2025 | $6,400 | $1,280 | $5,120 |2026 | $5,120 | $640 | $4,480 |

Notes:

• The amortization expense is recorded in the period in which it is incurred.
• The ending balance should be equal to the asset’s residual value at the end of its useful life.
• Amortization schedules are used for accounting purposes, not financial reporting.