Skip to main content
What is Amortization?
Updated over 8 months ago

About Amortization

Sales can only be recognized when they are earned. Because taxes are paid based on sales and profit, if you sell an annual in December, you don’t want to record January sales until January. If you can not deliver the service, the sale can not be delivered as revenue until the service is delivered. If you sell an annual plan in January, the amount being paid for December can’t be recognized until December because the revenue has not been truly earned.

Why We Use Amortization

Taxes apply to revenue that is earned. If you sell a paid in full annual plan in January, you have not delivered all promised services the plan pays for. If you report the full amount the client paid for the plan in January, you would be paying taxes early on the revenue for the months when the service is yet to be delivered. The Sales Report and the MRR Report both use amortization.

All other reports besides these two reports use amortization. The client Transactions Tab does not use amortization. Please use the Cash Report to view unamortized purchases, please use the Cash Report.

Did this answer your question?