This accounting approach allocates the cost of intangible assets over their useful life.

This accounting approach allocates the cost of intangible assets over their useful life.

• A. Amortization
• B. Balance Sheet
• C. Assets
• D. EBITDA

Answer: (A)

Amortization is the process of allocating the cost of intangible assets over their useful life. This ensures the expense is matched with the periods that benefit from the asset, reflecting consumption of value as the asset is used. For finite-lived intangibles like patents or licenses, you record an amortization expense on the income statement each period and accumulate it on the balance sheet, which reduces the asset’s carrying amount over time. Indefinite-lived intangibles aren’t amortized but are tested for impairment periodically. The other terms don’t describe spreading a cost over time: the Balance Sheet is a snapshot of financial position, Assets are resources owned, and EBITDA is a profitability metric that excludes depreciation and amortization.

Amortization is the process of allocating the cost of intangible assets over their useful life. This ensures the expense is matched with the periods that benefit from the asset, reflecting consumption of value as the asset is used. For finite-lived intangibles like patents or licenses, you record an amortization expense on the income statement each period and accumulate it on the balance sheet, which reduces the asset’s carrying amount over time. Indefinite-lived intangibles aren’t amortized but are tested for impairment periodically. The other terms don’t describe spreading a cost over time: the Balance Sheet is a snapshot of financial position, Assets are resources owned, and EBITDA is a profitability metric that excludes depreciation and amortization.