15 July 2010
Amortization 1. A tax deduction for the gradual consumption of the value of an asset, especially an intangible asset. For example, if a company spends $1 million on a patent that expires in 10 years, it amortizes the expense by deducting $100,000 from its taxable income over the course of 10 years. It is often used interchangeably with depreciation, which technically refers to the same thing for tangible assets.
2. The act of repaying a loan in regular payments over a given period of time.
15 July 2010
Amortization. Amortization is the gradual repayment of a debt over a period of time, such as monthly payments on a mortgage loan or credit card balance.
To amortize a loan, your payments must be large enough to pay not only the interest that has accrued but also to reduce the principal you owe. The word amortize itself tells the story, since it means "to bring to death."
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