Kembara’s Financial Solutions – What is Amortization?
In the United States of America, amortization is also known as depreciation. Amortization is the payment of debt in a series of installments over a period and includes the interest and part payment of the capital. Amortization is also considering an expense for the annual amount deemed to be wasted away from a fixed asset. An example includes the concept of leases. Leases are acquired for a given sum for a specified term at the end of which the lease will have no value. The cost of lease is divided with the number of years of its term and the result is considered as an annual charge against profit. A contribution to a sinking fund is also considered as amortization. Finally amortization also meant the spreading of the front end fee charged on taking out loan over the life for the loan.
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