Amortisatsiooni

Amortisation is the process of gradually writing off the cost of a tangible asset over its useful life. This financial practice is used to spread the cost of an asset over the period during which it is expected to be used. It is a method of accounting for depreciation, which is the reduction in value of an asset over time due to wear and tear, obsolescence, or other factors.

Amortisation is typically applied to assets such as buildings, machinery, vehicles, and equipment. The method of amortisation can vary depending on the type of asset and the accounting standards in place. Common methods include straight-line amortisation, where the asset's cost is evenly allocated over its useful life, and declining balance amortisation, where the asset's value is reduced by a fixed percentage each year.

The primary purpose of amortisation is to reflect the true value of an asset over time and to ensure that the financial statements accurately represent the company's financial position. It also helps in managing the company's cash flow by spreading the cost of the asset over its useful life, rather than recognizing the entire cost at the time of purchase.

Amortisation is an essential concept in accounting and finance, as it provides a systematic way to account for the depreciation of assets. It is used by businesses to manage their financial statements, plan for future investments, and make informed decisions about asset management.