Cost amortization is the accounting practice of spreading out the cost of an asset over its estimated useful life. In other words, it’s a way to spread the burden of the asset’s purchase price over a longer period of time in order to make it easier to manage. For example, if you buy a new car for $20,000 and expect to use it for five years, you could amortize the cost by deducting $4,000 each year as an expense. This helps reduce the amount of taxes you have to pay during those five years. Amortization also makes it easier to calculate depreciation, which is how much an asset decreases in value over time. If you’re running a business, cost amortization can help make your financial statements more accurate and easy to understand.