Was Is Amortized Cost?

Amortized cost is that accumulated portion of the recorded cost of a fixed asset that has been charged to expense through either depreciation or amortization. Depreciation is used to ratably reduce the cost of a tangible fixed asset, and amortization is used to ratably reduce the cost of an intangible fixed asset.

How do you calculate amortized cost?

Subtract the residual value of the asset from its original value. Divide that number by the asset's lifespan. The result is the amount you can amortize each year. If the asset has no residual value, simply divide the initial value by the lifespan.

What is the difference between cost and amortized cost?

Cost accounting assumes that a money market instrument purchased upon issuance and held until maturity should be priced at cost. Amortized cost accounting assumes that a money market instrument, acquired after issuance and held until maturity, should be priced at its acquisition cost.