Systematically moving the same amount each accounting period from a balance sheet account to an income statement account. For example, if the amount of Discount on Bonds Payable on a 10-year bond is not significant, then each year 1/10 of the original amount of discount will be debited to Bond Interest Expense and credited to Discount on Bonds Payable each year. If the amount of discount is significant, the effective interest method of amortization should be used.
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For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
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