Finance and Management - 31

In the earlier blog, we learnt about depreciation. In today's blog we would look at the concept of "amortization".

While we discussed depreciation and explained it in the context of a tangible asset, we also mentioned that the concept could also be used with intangible assets. When the concept is extended to an intangible asset say a trademark, or patent, or copyright that the company owns - we call it amortization.

An example could make this clearer - Let us say the company ABC Pvt Ltd spent Rs 3,00,000/- to buy a calibration device, which has a patent protection for 15 years; this means that the every year Rs 20,000/- would be recorded as amortization expense.

This repayment is generally over multiple cash-flows installments and is represented by an amortization schedule.

Read in Kannada:
http://somanagement.blogspot.com/2011/09/depreciation.html