Amortization

Amortization, like depreciation, is the process of deducting, over a set period of time, the costs
incurred in the procurement of assets.  Whereas depreciation is used to expense out (over the
useful life) the costs of  tangible assets such as buildings, furniture, and machines;
amortization is used to recover the cost of intangible assets such as:

     • Going into Business Costs - start up expenditures, cost of incorporating, etc. • Lease for Business
 Property • Goodwill, patents, customer base, permits, etc. • Reforestation Costs - direct costs of
 planting or seeding • Pollution Control Facilities

Amortization (or amortisation) is the process of decreasing, or accounting for, an amount over a period.
 The word comes from Middle English amortisen to kill, alienate in mortmain, from Anglo-


When used in the context of a home purchase, amortization is the process by which your loan 
principal decreases over the life of your loan. With each mortgage payment that you make, a 
portion of your payment is applied towards reducing your principal and another portion of your 
payment is applied towards paying the interest on the loan. An Amortization table shows this ratio
 of principal and interest and demonstrates how your loan's principal amount decreases over time. Amortization is generally known as depreciation of intangible assets of a firm.