Amortization

Posted in Finance, Accounting and Economics Terms, Total Reads: 1540
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Definition: Amortization

Amortization is same as depreciation in the case of tangible assets while amortization is relevant to intangible assets.

It is the reduction in the value of an intangible asset/liability such as a loan etc. over its life.

Amortization table shows the reduction in value of an intangible asset over its life for each time period.


Example

A loan payment includes both principle and interest, so the loan amount decreases each time by the principal and this is referred to as the amortization of a loan.




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