Explore commonly used personal finance terms.
Amortization expense is the periodic cost associated with gradually reducing a loan balance or allocating the cost of an intangible asset over its useful life. For loans, amortization expense reflects the portion of each payment applied to principal. For intangible assets, it spreads the asset’s cost over its estimated useful life. Recording amortization expense allows companies to match expenses with revenues accurately, providing a clearer view of financial performance and preserving the asset’s value on financial statements.
