
What is amortisation?
Amortisation is the process of spreading out the repayment of a loan or the cost of an intangible asset over a set period of time. Depending on the conditions set by banks or copyright agencies, this is usually a set number of months or years. Amortisation frequently results in interest payments, which are set at the lender's discretion.
Amortisation is the process of gradually reducing a debt or spreading out the cost of an asset over time through scheduled payments. In finance, it usually refers to loan repayments, where each instalment covers both interest and a portion of the principal, steadily lowering the outstanding balance until the loan is fully paid. For example, mortgages and car loans often follow an amortisation schedule. In accounting, amortisation also applies to intangible assets such as patents, trademarks, or goodwill. Instead of expensing the entire cost at once, businesses spread it over the asset’s useful life. This approach helps match costs with revenues, providing a clearer financial picture. Essentially, amortisation reflects systematic allocation or repayment over time.
Oct 10, 2022 00:39