Amortization refers to two primary financial concepts: the gradual repayment of a loan through regular payments and the allocation of the cost of an intangible asset over its useful life. In the context of loans, amortization involves dividing the balance of the loan into equal installments consisting of both principal and interest components, ensuring the complete repayment of the loan at the end of its term. For example, a mortgage for a house is typically amortized over 15 to 30 years, meaning the borrower makes fixed monthly payments until the loan is paid off. On the other hand, for intangible assets such as patents or rights, amortization allows businesses to spread the expense over the asset's estimated life, ensuring accurate financial reporting. For instance, a company acquiring a 20-year patent may amortize the cost of the patent across those two decades to reflect the diminishing value of the asset over time. Significantly, amortization aids in accurate financial statement preparation and compliance with accounting standards.