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What is amortization?
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Answer Posted / sunny parekh
The paying off of debt in regular installments over a period
of time.
The deduction of capital expenses over a specific period of
time. Similar to depreciation, it is a method of measuring
the consumption of the value of long-term assets like
equipment or buildings.
Think of amortization (the deduction of capital expenses) as
a way to claim the decrease in value on your car every year.
If you bought your car new for $20,000 and after the first
year it is worth $17,000, theoretically you could amortize
the $3,000 for tax and financial purposes.
But depreciation refers to only Tangible Asset(Building,
Cars etc.) and amortization refers to only Intangible
Asset(Patent, Bonds etc.).
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