Entrepreneurship & Small Business

Confused between Amortization and Capital cost allowance (CCA)

  • Last Updated:
  • Dec 6th, 2018 8:57 pm
[OP]
Deal Addict
Feb 12, 2004
1439 posts
112 upvotes

Confused between Amortization and Capital cost allowance (CCA)

My first time to fill a T2 form. In schedule 1, there are line 104 - Amortization of Tangible Assets, and line 403 - Capital Cost Allowance from Schedule 8. I've already figured out CCA, and thought it's same as Amortization. Why there is a different line for it, and what should I put in 104?

And from this page, someone said they should be the same, but it doesn't make sense because on Schedule 1 you are adding 2 lines.

http://madanca.com/blog/how-to-prepare- ... in-canada/

Please help, thanks!
3 replies
Newbie
Dec 3, 2018
1 posts
Amortization is an accounting calculation of an expense deducted to arrive at Net Income on your financial statements based on the useful life of an asset..capital cost allowance is what CRA determines you can claim on the T2. To calculate income for tax purposes you add back the Amortization calculated in your net income (increase income) and deduct CCA. Hope that helps!
Sr. Member
Jan 1, 2009
958 posts
272 upvotes
Vancouver
Absolutely what SharedKnowledge said. Most companies amortize/depreciate the capital cost of an asset over many years using straight line method, declining balance method, sum of years digits method, or some other derivative. The government is not interested in the company's accounting policy for depreciation of a capital asset (since companies can try to write off more using their accounting policy), so the CCA mechanism is what the government will accept for depreciation (basically putting a cap on what a company can claim for depreciation). Add back the amortization on schedule 1, then deduct the CCA. Done!
[OP]
Deal Addict
Feb 12, 2004
1439 posts
112 upvotes
Just figured it out.. thanks for the input!

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