Dictionary : Amortization
1. The paying off of debt in regular installments over a period of time.
2. The deduction of capital expenses over a specific period of time. Similar to depreciation, it is a method of measuring the consumption of the value of long-term assets like equipment or buildings.
Think of amortization (the deduction of capital expenses) as a way to claim the decrease in value on your car every year. If you bought your car new for $20,000 and after the first year it is worth $17,000, theoretically, you could amortize the $3,000 for tax and financial purposes.
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