Calculating amortization expense is a crucial step in any business’s accounting process. When an asset is acquired, it is typically funded through either a debt instrument or an equity instrument. The difference between the two instruments is that a debt instrument requires periodic payments and an equity instrument does not. Amortization expense is the amount that must be allocated each year towards the repayment of the initial debt instrument taken out when acquiring the asset. This helps to ensure that businesses can properly account for their long-term investments and prepare to pay off their debt obligations in full over the life of the loan. In addition, calculating amortization helps businesses accurately reflect the cost of their operations on their financial statements.