How do I account on the balance sheet for organization costs that are to be amortized over 12 mths?

Question

eg: $60k org costs, mthly $5k over 12 mths. Is this correct: DR 60k to assets (acct name: deferred org costs), CR 60k expense (acct name: org expense). CR 5k assets (acct name: deferred org costs), DR 5k liabilities (acct name: org expense)

Answer 1

When you first incurred the costs, you'd:
Dr Organisation costs 60k
Cr Cash 60k

If you really want to amortise these costs, then every month, you:
Dr Amortisation of orgn costs 5k
Cr Accumulated amortisation of orgn costs 5k

After 12 months, the accd amortisation a/c total would be 60k and when contra-ed against the orgn costs a/c, would give a 0 net balance for orgn costs.

However pls note that organisation costs do not fulfil the criteria for assets and are supposed to be expensed off when incurred.

Answer 2

Partially right. The first part, DR $60K. The $60K credit would be to expense only if that's where it was originally coded.

To amortize, debit $5K to expense (not liabilities), credit $5K to accumulated amortization, a contra account (still classified as an asset) to the deferred org costs.