amortization

Accounting practice where the progressive reduction (‘depreciation’) of a fixed asset is expressed as an expense in the accounts. This is commonly used when dealing with the value of a lease in an account. Leases are acquired at a fixed sum for a fixed period, at the end of which they have little or no value. The cost of the lease is divided by its length, and the result is charged against profits in the accounts.

Amortization is also used to describe the repayment of a debt in instalments (such as a repayment mortgage on a house), where each instalment is part principal and part interest.