It is called amortization to the act and the result of amortizing . East verb , which comes from the Latin word I will admortize, refers to the extinction of the capital of a debt , to compensation or recovery of an investment Yet the elimination of vacant positions in an entity .
The depreciation idea, in this way, is used in the field of accounting and of the economy . The concept is often used with respect to depreciation of a value over time , since it is divided into different periods.
According to the first of the meanings mentioned above, the amortization may be the payment of a debt in dues , including the corresponding disbursement interests . With each payment, the debtor reduces the debt and pays the interest.
Amortizations are such debt payments. That is to say: each disbursement that is made to reduce the debt is an amortization. Depending on how the interests , the depreciation can be done with the american system , he german system or the french system , which are described below:
* the American system : recognizes only one amortization, which is done when the life of the loan , since interest must be paid throughout this period. Since there are no capital payments that take place between the beginning and the end of the debt, the annual interest value can be fixed. It is possible to say that this concept is opposed to that of depreciation;
* the German system : this one is also known by the name of fixed repayment rate system, which largely describes the concept, as well as the fact that the share Total and interest decreasing. One of its main features is that in each annuity the interest must be paid in advance;
* the French system : in this case, the objective is to define a fixed quota, and for this a calculation must be made on the compound interest that allows segregating the crescent (which can also be considered the principal) of the decreasing.
A technical amortization , on the other hand, is carried out as a good loses value by its use or by the passage of time. To compensate for this loss, it is customary for companies to establish amortization funds : Every year they make an economic contribution so that, when the useful life of the asset that has been amortized has ended, it can be replenished.
In simpler words, amortization implies consideration of the loss of value of a good (an asset of a company) over the years. If the companies did not take the job of loading this depreciation that their fixed assets traverse throughout the year, then there would be a decapitalization, which in general terms we could describe as an impoverishment, and that is why it is so important to establish an amortization policy.
One of the meanings of the term amortize that presents the dictionary of the Royal Spanish Academy defines it as the "recovery or compensation of the funds that have been invested in a company ", and this leads us to one of the uses it receives in everyday speech, which refers to" having taken advantage of a product properly. "
Let's look at some example sentences of this last meaning in popular language: "The truth is that with all these trips we cannot deny that we have amortized the car", "Do not worry about the breakdown, that this device was already more than amortized after so many years of use", "I know it's a very expensive computer, but it's worth it because I know I'm going to write it off.".