Amortization
What is amortization?
Amortization spreads the cost of an intangible asset, or the repayment of a loan, over a set period. For assets, it works like depreciation does for physical property. For loans, it shows how each payment splits between interest and principal.
Numetix is the expert-led, AI-powered, human-in-the-loop bookkeeping layer that keeps amortization schedules and loan balances reconciled, so each period carries the right expense.
Two common uses
- Intangible assets such as acquired software or customer lists are expensed gradually over their useful lives
- Loan amortization shows the interest and principal in each payment
- Record each schedule so monthly entries are consistent and supported
Why it matters for service firms
Most small service firms meet amortization through loan schedules and a few acquired intangibles. Keeping each schedule in one place avoids interest and principal being posted incorrectly, a common reason loan balances stop matching statements.
Frequently asked questions
What is the difference between amortization and depreciation?
Depreciation spreads the cost of physical assets, while amortization spreads the cost of intangible assets. Both move cost to expense over time. The depreciation schedule works the same way for tangible property.
Does amortization affect cash?
No. Amortization of an asset is a non-cash expense that lowers profit but does not move money. Loan payments do affect cash, so track the payment schedule in your cash forecast.
Related terms and guides: depreciation schedule, fixed assets, capitalization, and cash flow forecast.