Amortization

The process of reducing a cost or total in regular small amounts.

Amortization can demonstrate a decrease in the book value of your assets, which can help to reduce your company’s taxable income. In fact, there may even be a legal component. In some cases, failing to include amortization on your balance sheet may constitute fraud, which is why it’s extremely important to stay on top of amortization in accounting. Plus, since amortization can be listed as an expense, you can use it to limit the value of your stockholder’s equity.

Sources:

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