What is Amortisation?
Amortisation is the gradual write-off of the cost of an intangible asset (software, patents, goodwill) over its useful life, similar to depreciation for tangible assets.
Amortisation vs Depreciation
Depreciation applies to tangible fixed assets (machinery, vehicles, buildings). Amortisation applies to intangible assets (software licences, goodwill acquired in a merger, customer lists, patents). Both reduce the carrying value of an asset and create an expense in the P&L over the asset's useful life.
Amortisation in ERPNext
ERPNext handles amortisation via the Asset module for intangible assets. Create an Asset for the intangible (e.g., "ERP Software Licence"), set the asset class to Intangible, choose SLM depreciation over the licence period, and let ERPNext post monthly amortisation entries automatically.
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