Amortization in the temporal context
The term "amortization" or "amortization" comes from French and means "repay" (amortir). There are different meanings to be considered. The most common is the process of the amotation time or the amortization time. It describes how long it takes for an investment (financial expenditure, expenditure) to pay off. This means that it is crucial how much time it takes for the output to be an actual gain. At first it is a loss in the actual sense, which finally comes to a balance until finally the phase of the profit takes place. However, this does not always have to happen in this way. Individual investments are amortized or depreciated within the period. It therefore requires a perfect overview of the respective transactions. Of course, decisions are also made as to which items or items are treated. The temporal extent can vary widely and is dependent on several factors. These should therefore be carefully considered and best analyzed with professional and competent assistance.
Amortization is diverse
The concept of an amortization is used in economic science, energy technology and also in the legal scientific context. The origin has this designation already in the Middle Ages to far-reaching into the 20. Century. In history, the connection with the church's wealth was used above all. The background is that the goods were withdrawn from the secular economic cycle. The amortization limit controls the amount of the permissible sum of the individual values. The funds invested ultimately result from the returns of the respective investments. As soon as the volume of the accumulated and returned funds is exceeded, this is an amortized investment. It is also necessary to take account of the eradication of a previously defined and specific plan.
The tax term
Amortization is the tax term for the repayment of a bond or loan. This was preceded by a previously defined amortization plan. We can also speak of debt repayment in connection with the debt. It is indispensable that the production costs or the acquisition costs must be exceeded in order to speak of an amortization. Also the scheduled repayment of the loans is called amortization. Lost checks are declared void and have been amortized. Similarly, a change may be made before the magistrate's office. Another point is the withdrawal of GmbH shares, which also includes the definition of amortization.
Static amortization time
The amortization account is the period during which the invested capital can be obtained from the returns of the capital. All the reflux components are decisive. These include depreciation, profits and imputed interest. The contrast to the static amortization time is the dynamic amortization time. This is understood as the return of the investment project. An interest rate is also applied in the amount of the calculation flow. The investment projects are then assessed in terms of their profitability and existing risks.
Calculation of the amortization period
There are basically two methods for calculating the payback period. On the one hand the average method exists and the second possibility is the cumulative method. The average method is used for constant annual financial statements. In some exceptional cases, however, the average method is also used in the execution of various annual financial statements. The cumulative method is, however, only suitable for different annual financial statements.
Calculation of the amortization period using the average method:
All the annual financial statements must be added first. This is then split by the period of use to determine the average annual surplus. In the case of constant surpluses, this partial calculation can, of course, be omitted.