Amortization in financial accounting is a process of spreading the cost of an intangible asset over the course of its useful life. This means reducing an amount owed over time until it reaches zero at the end of the amortization period. For example, if you purchase a software license for $10,000 over 10 years with an amortization period beginning on the first day of each year, your annual payments would be $1,000 for 10 years until the balance reaches zero. Amortization can also refer to the gradual reduction of debt through periodic payments; basically, it’s like paying off a loan or other debt obligation over time.