Calculate amortization automatically

Manager’s Amortization Calculation Worksheet currently calculates amortization using the declining balance method. Amortization is calculated as a percentage of book value based on the number of days in the amortization period. If this is not your amortization method, you cannot use this worksheet for that asset. Capabilities for other amortization methods, including straight-line, will be added in the future.

Manager can calculate amortization automatically and enter amortization for an accounting period for all intangible assets at once. To include an intangible asset in this process, its annual amortization rate must be entered on the intangible asset form:

The annual amortization rate can be entered when purchasing new intangible assets. Or it can be added by clicking Edit for an intangible asset in the Intangible Assets tab.

Manager treats the annual amortization rate as a notional rate for a typical, 365-day year. To figure amortization over a defined time period, the program calculates a daily amortization rate from the notional annual rate by dividing the annual rate by 365. As a result, amortization calculated for leap years will be slightly more than for standard-length years.

Calculate amortization

After you specify amortization rates on all your active intangible assets, go to the Reports tab and click on Amortization Calculation Worksheet, then on New Report:

Create a report covering the period for which you want to calculate amortization for your intangible assets:

  • The From date will be prefilled with the current date. Change this to the first day of the accounting period for which you are calculating amortization.
  • The Until date will also be prefilled with the current date. Change this to the last day of the accounting period for which you are calculating amortization.
  • Enter a Description of the amortization being calculated.

Click Create. The report will calculate amortization amount for each intangible asset.

Before creating a new report, all prior amortization must be calculated and entered for all intangible assets. The calculation worksheet assumes book values of intangible assets are valid from the first day of the defined period. If this is not true, both current and future amortization calculations will be wrong. (If amortization for a prior accounting period has not been entered, you can calculate and enter it by creating reports with earlier date ranges. However, these must be created in chronological order.

When an asset has no book value at the beginning of a period, no amortization should be calculated for it. Therefore, when assets are added during an accounting period, amortization for existing assets must be calculated through the day before a new asset is added. A separate worksheet must be created beginning on the date of acquisition of the new asset, running through the end of the accounting period. If assets are acquired on staggered dates, several worksheets might be required for a single accounting period.

Brilliant Industries has only one intangible asset. Based on the amortization rate entered for it, the Amortization Calculation Worksheet produces the following for 2018:

Enter amortization

If you are satisfied with calculated figures, click on New Amortization Entry on the report:

This will copy the figures from the report into an actual transaction in the Amortization Entries tab. There, you can edit the figures if needed. The Amortization Calculation Worksheet is just a worksheet to give you good starting point so you don’t have to calculate all the figures from scratch.

Brilliant Industries reviews the worksheet from the previous example, confirming accuracy of the numbers. It clicks on New Amortization Entry to generate an amortization entry for all (in this example, only one) intangible assets for the 2018 accounting period:

Since Brilliant does not assign intangible assets to divisions, it leaves that field blank. It could, however, have chosen a division if it desired.

Calculate amortization for subsequent accounting periods

For subsequent accounting periods, the book values determined by Manager after applying the calculated amortization will be used as the starting point for the next Amortization Calculation Worksheet.

For the following year, Brilliant Industries generates another Amortization Calculation Worksheet. Note the different book values and calculated results:

Calculate amortization for disposed assets

When intangible assets are disposed part way through an accounting period, Manager makes appropriate adjustments on the worksheet.

Brilliant Industries became worthless to the company at the end of August 2019 when products using it were discontinued. The intangible asset was disposed. As a result, only 243 days worth of amortization is calculated:

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