Amortization is an accounting technique used to periodically lower the book value of a loan or intangible asset over a set period of time.

When businesses amortize expenses over time, they help tie the cost of using an asset to the revenues it generates in the same accounting period.

**Formula to calculate amortization.**

**P =**Principle**r=**Rate of interest**t =**Time in terms of year**n =**Monthly payment in a year**I =**Interest

**Example:**

Calculate amortization if the loan’s principle amount is $ 3,000, and your supposed to pay it back after 5 years semi annually with a 7% interest rate.

Therefore, the amortization cost is $ 323.58.