What is an example of amortization?

Amortization is most commonly used for the gradual write-down of the cost of those intangible assets that have a specific useful life. Examples of intangible assets are patents, copyrights, taxi licenses, and trademarks. The concept also applies to such items as the discount on notes receivable and deferred charges.

What is the difference between depreciation and amortization?

The difference between depreciation and amortization is that amortization is associated with charging intangible assets to expense over time, and depreciation is associated with charging tangible assets to expense over time. Similarly, depletion is associated with charging the cost of natural resources to expense over their usage period.

What is amortization in accounting?

Amortization is the process of incrementally charging the cost of an asset to expense over its expected period of use. Doing so incrementally shifts the recorded amount of an asset from the balance sheet to the income statement of a reporting entity. It essentially reflects the consumption of an intangible asset over its useful life.