Term of the Day amortization 1. Preferred term for the apportionment (charging or writing off) of the cost of an intangible asset as an operational cost over the assets estimated useful life. It is identical to depreciation, the preferred term for tangible assets. The purpose of both terms is to (1) reflect reduction in the book value of the asset due to usage and/or obsolescence, (2) spread a large expenditure proportionately over a fixed period, and thereby (3) reduce the taxable income (not the actual or cash income) of a firm. In effect, it is a process by which invested capital of a firm is recovered by gradual sale of the firms asset(s) to its customers over the years. 2. Gradual repayment of a loan in equal (or nearly equal) installments which include portions of ... Learn more about this term Usage Example Many mortgage payments use the amortization process, meaning that a portion of the mortgage payment goes towards reducing the remaining principal on the loan while the other portion goes towards paying the interest on the loan.
Posted on: Thu, 09 Oct 2014 08:31:38 +0000
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