Amortization is the process of expensing the cost of an asset or loan over time.
The process of systematically reducing the value of an intangible asset or spreading out the cost of a long-term liability over time. It involves allocating the expense or the repayment of a loan into equal periodic payments. In the context of small business owners, amortization commonly applies to intangible assets like patents, copyrights, or trademarks, as well as to long-term liabilities like loans or mortgages. Amortization allows businesses to reflect the gradual consumption or repayment of these assets or liabilities on their financial statements. Understanding and properly accounting for amortization is crucial for small business owners to accurately report their financial performance, assess the value of their assets, and manage their long-term debt obligations effectively.