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The root of the word amortization stems from the old English word amortisen that meant "to kill." In its modern usage the term has several financial meanings:1. Accounting for Intangible AssetsAmortization refers to the process of accounting for the cost of intangible assets over a period of time as prescribed by relevant tax laws.
2. Payment of Loan PrincipleAmortization refers to the payment of principle over the term of a loan. This is often illustrated in an amortization schedule that shows the remaining principle after each scheduled payment.3. Zoning AmortizationAmortization is occasionally used as a legal term to describe the time period that is given to comply with new zoning rules. For example, if a section of a city is zoned to residential from industrial, businesses in the area may be given five years to comply.|
Type | | Definitions | The process of accounting for the cost of an intangible asset over time.The reduction in principle that occurs after each payment over the life of a loan.A time period that is granted to comply with new zoning regulations. | Related Concepts | Depreciation |
Next: Amortization vs Depreciation
Business Costs
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