Final answer:
In accounting for the amortization of a patent, Amortization Expense account is debited and the Patent account, or the Accumulated Amortization account if used, is credited to reflect the consumption of the patent's value over time.
Step-by-step explanation:
To account for one year of amortization on a patent, the account that would be credited is Amortization Expense. When recording amortization, it is treated similarly to depreciation of tangible assets. The journal entry would involve a debit to Amortization Expense, representing the expense being recognized on the income statement, and a credit to the Patent account, reducing the value of the intangible asset on the balance sheet. It is noteworthy that some accounting systems might use an Accumulated Amortization account which is a contra asset account and is used to accumulate the total amortization of the intangible asset over time. However, if the direct method is used, the Patent account itself is credited.
The correct entry to record the amortization of a patent for a year would be:
- Debit Amortization Expense
- Credit Patent or Accumulated Amortization (if used)
The Amortization Expense account is debited because it represents the cost of the patent consumed during the year. The Patent account (or Accumulated Amortization, if applicable) is credited to reflect the decrease in value of the patent as a result of its use or passage of time.