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Essay / Research Paper Abstract
This 3-page paper explains the concepts of amortization and depreciation. Bibliography lists 2 sources.
Page Count:
3 pages (~225 words per page)
File: D0_MTamordepr.rtf
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Unformatted sample text from the term paper:
which these terms were discussed, she missed out on the meaning of these two terms. Its our job to explain them to her.
Amortization has two definitions - they paying off of debt in regular installments over a period of time and education of capital expenses during a specific period of time
(Amortization, 2009). The purpose of amortization is to determine the value of an intangible asset, such as a loan, copyright or patent (Amortization, 2009). Invesopedia gives a particular example, that
of a patent on a particular piece of medical equipment. If a medical company spent $30 million on that piece of medical equipment and the patent on that equipment lasts
for 15 years, the medical company would record $2 million each year as an amortization expense (Amortization, 2009). In other words, the amount the medical company spent on the equipment,
divided by the number of years during which the patent is active. Amortization can be calculated with help from an amortization schedule.
The schedule includes the amount of the loan (or patent) principal and the amount of interest that comprises each payment, so the loan is paid off at the end of
the term. With any loan payment, the initial payments are mainly put toward interest. As more and more payments are made, the payments start chipping away at the principal.
Some people interchange amortization with depreciation, but this isnt a correct practice (Amortization, 2009). Amortization refers to intangible assets, while depreciation deals
with tangible assets, such as equipment and property. Depreciation is used to allocate a tangible assets cost over its useful life (Depreciation,
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