What is Amortization?
Spreading an intangible asset’s cost - or a loan’s principal - evenly over the periods it applies to.
Amortization: definition
Amortization has two related meanings. In asset accounting, it spreads the cost of an intangible asset - capitalized software, patents, trademarks, goodwill - across its useful life, just as depreciation does for tangible assets. In lending, it describes how each loan payment splits between interest and principal so the balance reaches zero by the end of the term.
- Asset amortization: expensing intangibles over their useful life
- Loan amortization: scheduling principal-and-interest payments to zero
- Both follow a defined schedule tied to time
- The intangible counterpart to depreciation
How Fintra handles it
Fintra amortizes intangible assets on a schedule, posting the periodic expense and reducing book value automatically, and it tracks loan balances with their interest-and-principal split. Like depreciation, these entries are part of the automated close, so the intangible and liability balances always tie out without a manual amortization table.
Worked example
Frequently asked questions
What is the difference between amortization and depreciation?
Amortization applies to intangible assets (software, patents, goodwill); depreciation applies to tangible assets (equipment, buildings). Both spread cost over an asset’s useful life following a schedule. The mechanics are the same; the asset type differs.
What is a loan amortization schedule?
It is the table showing how each loan payment divides between interest and principal over the term, gradually reducing the balance to zero. Early payments are interest-heavy; later ones are principal-heavy. Fintra tracks the split as payments post.
Is amortization a non-cash expense?
Asset amortization is non-cash - like depreciation, the cash left when the asset was acquired, and the expense is recognized over time. That is why it is added back in EBITDA. Loan amortization, by contrast, involves real cash payments.
Does Fintra handle amortization automatically?
Yes. Fintra amortizes intangibles on a schedule and tracks loan balances with their interest/principal split, posting the entries as part of the automated close so balances always reconcile.
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