Amortization & Intangible Assets — Complete User Guide — Two Accounts Web

Comprehensive guide covering Intangible Asset setup, amortization calculation, amortization entry creation, and financial report impact — with sample data and accounting regulation validation.

Table of Contents

1. Prerequisites — Enabling via Customize Menu
2. System Overview
3. Intangible Asset Setup
4. Amortization Calculation Worksheet
5. Amortization Entry
6. GL Posting (Double-Entry)
7. Reporting Impact
8. Sample Data
9. Edge Cases
10. Accounting Regulation Validation

Prerequisites — Enabling via Customize Menu

The Intangible Assets and Amortization Entries features are not visible by default. You must enable them through the Customize Menu before you can use them.

How to Enable

1. Go to Customize Menu (click the Customize button from navigation bar)
2. Find the Intangible Assets toggle and enable it (set to visible)
3. The Amortization Entries toggle will appear once Intangible Assets is enabled
4. Enable Amortization Entries as needed
5. Click Save — the Intangible Assets and Amortization Entries tabs will now appear in the main navigation

1. System Overview

The Amortization module handles the systematic allocation of the cost of an intangible asset over its useful life. Per IAS 38, intangible assets with finite useful lives must be amortized.

1.1 Key Concepts

1.2 Lifecycle

1. Create an Intangible Asset — Define the asset with its cost, amortisation rate, and GL account preferences.
2. Run the Amortization Calculation Worksheet — A report that calculates the amortisation amount for a chosen date range.
3. Create an Amortization Entry — Automatically populated from the worksheet results. Saving it posts the GL entries.
4. View in Financial Reports — The amortisation appears in the Profit & Loss Statement (expense) and Balance Sheet (accumulated amortisation).

2. Intangible Asset Setup

2.1 Navigation

Settings → Intangible Assets → New Intangible Asset

2.2 All Fields

2.3 GL Accounts Used

3. Amortization Calculation Worksheet

3.1 Navigation

Reports → Amortization Calculation Worksheet → New

3.2 Input Fields

3.3 Calculation Method

For each intangible asset that has not been fully disposed before the period start:

Amortization = Net Book Value at period start × Annual Rate% × (Days in period / 365)

Where:

• Net Book Value = original cost plus accumulated amortisation up to the day before the period start
• Annual Rate = the percentage set on the Intangible Asset record
• Days in period = number of days from From Date to To Date, inclusive
• If the asset was disposed during the period, the days after disposal are excluded
• If the calculated amount is negative, it is set to zero

3.4 Worksheet Output Columns

4. Amortization Entry

4.1 Navigation

Amortization Entries → New Amortization Entry

Alternatively, from the Amortization Calculation Worksheet, click the "New Amortization Entry" button. The form is automatically populated with the worksheet's results.

4.2 Entry Fields

4.3 Line Fields

4.4 List View

The Amortization Entries list shows:

• Date — Entry date (a warning is shown if the date is in the future)
• Reference — Auto-generated reference number
• Description — Period description
• Intangible Assets — Names of the assets being amortised
• Division — Division names from the entry lines
• Amount — Total amortisation amount for the entry

5. GL Posting (Double-Entry)

5.1 How Each Line Is Posted

Each line of an Amortization Entry creates two General Ledger transactions:

Debit   Intangible Assets Amortization (Profit & Loss — Expense)
          Amount: amortisation amount (positive)

Credit  Accumulated Amortization (Balance Sheet — Contra-Asset)
          Amount: amortisation amount (negative, i.e. credit)

If the intangible asset has a custom amortisation expense account configured, the debit goes to that account instead of the default.

5.2 DR = CR Guarantee

Every entry line is self-balancing:

Example — Amortisation of BDT 9,322.74:

Dr  Intangible Assets Amortization               9,322.74
  Cr  Accumulated Amortization                             9,322.74
                                                    ───────────
                                                        DR = CR ✅

6. Reporting Impact

6.1 Balance Sheet

The accumulated amortisation appears as a contra-asset under intangible assets:

Assets:
  Intangible Assets at Cost                     100,000.00
  Less: Accumulated Amortisation                (15,322.74)
  Net Intangible Assets                          84,677.26

6.2 Profit & Loss Statement

The amortisation expense appears in its assigned expense group:

Operating Expenses:
  Intangible Assets Amortisation                 9,322.74

6.3 Trial Balance

Account                                          Debit        Credit
Intangible Assets at Cost                     100,000.00
Accumulated Amortisation                                       15,322.74
Intangible Assets Amortisation                   9,322.74

6.4 Cash Flow Statement (Indirect Method)

Amortisation is a non-cash expense. Under the indirect method, it is added back to net profit when calculating cash from operations:

Net Profit                                         XX,XXX
Add back non-cash items:
  Intangible Assets Amortisation                   9,322.74

6.5 Intangible Asset Summary Report

Shows a per-asset breakdown of cost, accumulated amortisation, period amortisation, and net book value.

6.6 Amortization Calculation Worksheet

Shows the calculation for each asset: book value, rate, days, and computed amortisation amount. This is the source document before creating the entry.

7. Sample Data

7.1 Scenario

7.2 Opening Position (Before Period)

7.3 Worksheet Calculation

Period: 1 Jan 2026 to 30 Jun 2026 (181 days)

Net Book Value         = 100,000.00 - 6,000.00 = 94,000.00
Annual Rate            = 20%
Days in Period         = 181
Amortization           = 94,000.00 × 20% × (181 / 365)
                       = 94,000.00 × 0.20 × 0.49589
                       = BDT 9,322.74

7.4 Worksheet Output

7.5 Amortization Entry

7.6 GL Posting

Dr  Intangible Assets Amortization (P&L — Expense)        9,322.74
  Cr  Accumulated Amortization (BS — Contra-Asset)                   9,322.74
                                                               ───────────
                                                                   DR = CR ✅

7.7 After Posting — Account Balances

7.8 Financial Statement Impact

Balance Sheet (Extract):

Assets:
  Intangible Assets at Cost                   100,000.00
  Less: Accumulated Amortization              (15,322.74)
  Net Intangible Assets                        84,677.26

Profit & Loss (Extract):

Operating Expenses:
  Intangible Assets Amortization               9,322.74

7.9 Multiple Assets in One Period

Dr  Intangible Assets Amortization (Total)            16,596.43
  Cr  Accumulated Amortization (Patent XYZ)                         9,322.74
  Cr  Accumulated Amortization (Trademark ABC)                      2,356.16
  Cr  Accumulated Amortization (Software License)                   4,917.53
                                                               ──────────
                                                                   DR = CR ✅

8. Edge Cases

9. Accounting Regulation Validation

9.1 Full Lifecycle Example (5-Year Asset)

9.2 Pre-Save Checklist

[ ] Intangible asset has a name set
[ ] Amortisation rate is greater than 0
[ ] Worksheet From Date and To Date are correct
[ ] Worksheet covers the intended period
[ ] Calculated amortisation amounts are reasonable
[ ] Amortisation entry date matches worksheet To Date
[ ] All expected assets appear in the entry
[ ] Custom expense account is active (if used)
[ ] Disposed assets are marked as Disposed with a disposal date
[ ] DR = CR after posting (automatically guaranteed)

End of Amortization & Intangible Assets User Guide