Accumulated Amortization
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Written by Nate Jewell
Updated over a week ago

What is Accumulated Amortization?

  • Definition: Accumulated amortization is the cumulative amortization of a loan or intangible asset up to a single point in its life. Accumulated amortization is a contra asset account, meaning its natural balance is a credit that reduces the overall asset value.

  • In Plain English: Accumulated amortization is the total amount a loan or intangible asset has depreciated up to a point in time.

  • Example: Your shoe company created a patent three months ago and it has amortized $3k each month. Your accumulated amortization is $3k+$3k+$3k=$9k

Why Should You Care?

  • It’s important to understand the accumulated amortization of your loans and intangible assets in order to determine its carrying value, which is the difference between its historical/original cost and accumulated amortization.

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