What does amortization mean?

Amortization typically refers to the process of writing down the value of either a loan or an intangible asset. Amortization schedules are used by lenders, such as financial institutions, to present a loan repayment schedule based on a specific maturity date.

What is difference between depreciation and amortization?

Amortization and depreciation are two methods of calculating the value for business assets over time. Amortization is the practice of spreading an intangible asset’s cost over that asset’s useful life. Depreciation is the expensing of a fixed asset over its useful life.

How do you calculate amortization?

Amortized payments are calculated by dividing the principal — the balance of the amount loaned after down payment — by the number of months allotted for repayment. Next, interest is added. Interest is calculated at the current rate according to the length of the loan, usually 15, 20, or 30 years.

What does the term amortization mean?

amortized; amortizing. transitive verb. 1 : to pay off (an obligation, such as a mortgage) gradually usually by periodic payments of principal and interest or by payments to a sinking fund amortize a loan. 2 : to gradually reduce or write off the cost or value of (something, such as an asset) amortize goodwill amortize machinery.

What are some examples of amortization?

What Are Some Examples of Amortization? Amortizable Intangible Assets. Your intellectual property, which includes your trademarks, patents, and copyrights along with processes, formulas, patterns, formats and designs you developed, are intangible assets you can amortize. Non-Section 197 Intangible Asset Amortization. IRS Amortization Rules. Amortization Tax Deduction Calculation.

What exactly is amortization?

Financial Definition of amortization. What It Is. Amortization is an accounting term that refers to the process of allocating the cost of an intangible asset over a period of time. It also refers to the repayment of loan principal over time.