Amortization cost, also known as amortization expense, is an accounting term that refers to the periodic reduction of an asset or liability over the course of its life. This cost represents the allocated amount of any loan payments made or received over time – and is recorded in an organization’s financial statements. Think of amortization cost like a debt or asset you need to pay off: it can be done gradually over time instead of in one big lump sum, which helps spread out the payment and make it easier to manage financially. Amortization cost has a wide range of business applications, from depreciation for equipment financing to mortgages and other liabilities.