Amortization

Definition

The spreading of a non-physical asset's cost over its useful life — the intangible-asset twin of depreciation. Applies to three families: intangibles, prepaid expenses, and right-of-use assets. Almost always straight-line, usually zero salvage.

Formula

Period amortization = Cost / Useful life periods

Worked Example

Perpetual software license $36,000, 3-year economic life:

Monthly amortization = $36,000 / 36 = $1,000

Each month $1,000 moves from the asset's book value to the income statement.

Interpretation & Pitfalls

Both depreciation and amortization are non-cash expenses and the 'DA' in EBITDA. Excluding them is convenient — but the assets will need replacing.

In TupicFinance

The amortizable-asset register supports all three families, each badged in the UI, with schedules posting monthly cost items.