Is Amortization Expense a Debit or Credit?
Amortization expense is a debit. Expenses increase with debits, so writing off part of an intangible asset debits amortization expense and credits accumulated amortization. Its normal balance is a debit, and for tax purposes it is computed in part VI of Form 4562.
- Account category
- Expense
- Normal balance
- Debit (Dr)
- Increases with
- Increase (Dr)
- Decreases with
- Decrease (Cr)
- Financial statement
- Income statement
Classifying one account is easy. Ledger IQ classifies the whole trial balance.
Try it freeAmortization expense on a trial balance
| Acct # | Account | Debit | Credit |
|---|---|---|---|
| 1000 | Cash | 48,200.00 | |
| 1200 | Accounts receivable | 86,400.00 | |
| 1300 | Inventory | 72,500.00 | |
| 1500 | Equipment, net of depreciation | 82,000.00 | |
| 2000 | Accounts payable | 31,500.00 | |
| 2400 | Notes payable | 85,000.00 | |
| 3900 | Equity, beginning of year | 172,600.00 | |
| 4000 | Sales revenue | 550,000.00 | |
| 4100 | Sales returns and allowances | 12,000.00 | |
| 4200 | Interest income | 1,200.00 | |
| 5000 | Cost of goods sold | 240,000.00 | |
| 6000 | Salaries and wages | 96,000.00 | |
| 6050 | Officer compensation | 60,000.00 | |
| 6060 | Payroll taxes | 11,900.00 | |
| 6100 | Rent expense | 36,000.00 | |
| 6150 | Insurance expense | 14,400.00 | |
| 6200 | Utilities expense | 9,600.00 | |
| 6250 | Advertising expense | 7,200.00 | |
| 6275 | Meals | 4,800.00 | |
| 6300 | Depreciation expense | 19,000.00 | |
| 6350 | Amortization expense (the account this page is about) | 4,000.00 | |
| 6400 | Bad debt expense | 3,500.00 | |
| 6450 | Interest expense | 6,800.00 | |
| 6900 | Other operating expenses | 26,000.00 | |
| Total | 840,300.00 | 840,300.00 |
Example journal entries
| Account | Debit | Credit |
|---|---|---|
| Amortization expense | 2,667.00 | |
| Accumulated amortization | 2,667.00 |
| Account | Debit | Credit |
|---|---|---|
| Amortization expense | 1,333.00 | |
| Accumulated amortization | 1,333.00 |
Why it works that way
Amortization is depreciation for things you cannot touch. An intangible asset with a limited life is written off over that life, which creates an expense, and expenses are debits. The credit goes to accumulated amortization, a contra asset, so the original cost stays visible on the balance sheet.
What gets amortized, and over what period
Section 197 intangibles, which includes acquired goodwill, going concern value, customer lists, trademarks, covenants not to compete and franchise rights, amortize over 15 years, 180 months, straight line from the month of acquisition. The 15 year period applies regardless of the asset's actual useful life, and a covenant not to compete is still 15 years even if the covenant runs for three.
Start up and organizational costs under sections 195 and 248 allow up to $5,000 each to be deducted immediately, with the remainder amortized over 180 months. The immediate deduction phases out once costs exceed $50,000.
Loan costs spread over the term of the loan. They are not interest and not deductible when paid.
Software follows its own rules depending on whether it was purchased, developed or acquired with a business.
The deduction that is missing from the trial balance
This is the practical point. Many small business books carry intangibles at cost and never amortize them, because nobody set up a schedule. The trial balance then shows no amortization expense at all, and a preparer working only from the trial balance claims nothing.
The deduction is still available. A company that bought a business three years ago with $40,000 allocated to goodwill has about $2,667 a year of amortization whether or not the books record it, and that is a Schedule M-1 difference rather than a lost deduction.
So an intangible on the balance sheet with no corresponding amortization expense is a question, not a conclusion. Start with the acquisition date and the purchase price allocation.
Book and tax differ here more than anywhere
Private company book treatment may amortize goodwill over ten years or not at all, while tax is always 180 months. The two will not agree, and forcing the books to match the return destroys the book figure for no benefit. Track the difference on Schedule M-1 instead.
Where it fits in the accounting equation
Tax return treatment
| Form | Line |
|---|---|
| Form 1120 | Page 1 line 20 depreciation and amortization not on 1125-A, from Form 4562 part VI |
| Form 1120S | Page 1 line 14, from Form 4562 part VI |
| Form 1065 | Page 1 line 16a, from Form 4562 part VI |
Common questions
Is amortization expense a debit or credit?
A debit. It is an expense, and the credit goes to accumulated amortization rather than to the intangible asset itself, so the original cost stays on the balance sheet.
How long is goodwill amortized over for tax?
Fifteen years, 180 months, straight line from the month of acquisition, under section 197. That period applies to acquired goodwill, customer lists, trademarks and covenants not to compete regardless of their actual economic life.
What is the difference between depreciation and amortization?
Depreciation writes off tangible assets like equipment and buildings; amortization writes off intangibles like goodwill, customer lists and loan costs. Both reduce an asset over time through a contra account, and both appear on Form 4562, amortization in part VI.
Why is there no amortization expense on my client trial balance?
Usually because no schedule was ever set up. The deduction still exists: an intangible on the balance sheet with no amortization is worth checking against the acquisition date and the purchase price allocation, and the book to tax difference goes on Schedule M-1.
Related answers
Go deeper
This page is the short answer. These articles work through the same ground in detail.
Last reviewed October 17, 2026.