What is Amortization?

Amortization (Definition)

Amortization is a strategy that is used to gradually reduce the value of a loan or intangible asset over a period. In other words, it is spreading out loan payments over a longer period. In accounting, this is included in the profit and loss category on the income statement, and it is deducted from earnings. When applied to an asset, amortisation is similar to depreciation in terms of calculation. Typically, amortisation is expensed on a straight-line basis, so the same amount is expensed periodically across the asset's life. Typically, assets that are expensed under the amortisation method have no resale or salvage value when they are written off.