Amortization is the process of gradually reducing the value of an intangible asset, such as a loan or bond, over a specific period of time. This is typically done by making regular, periodic payments over the life of the asset. Each payment is made up of a portion of the principal, which is the initial value of the asset, and a portion of the interest, which is the cost of borrowing the money. As the asset is paid off, the value of the principal is reduced, and the value of the asset is gradually amortized or written off. Amortization is commonly used in accounting to spread the cost of an intangible asset over its useful life.
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