Amortisation

With regard to loans, amortisation is the process of reducing the size of the loan by making scheduled repayments of principal (as opposed to the interest due on the loan outstandings). The amortisation schedule is thus the agreed series of repayments built into the loan agreement. In accounting, amortisation is also used as a synonym for depreciation – the process of writing down the value of an asset in an owner’s balance sheet by making regular charges to the income statement.