Depreciation, Depletion and Amortization:
What is the difference among depreciation, depletion, and amortization.
The term depreciation is used with reference to tangible fixed assets because the permanent continuing and gradual fall in book value is possible only in the case of fixed asset.
The term depletion is used for the depreciation of wasting assets such as mines, oil wells, timber trees etc.
The term amortization is used in respect of intangible assets like patents, copyrights, leasehold and goodwill which are recorded at cost. Some intangible assets have limited useful life and are, therefore, written off. The process of their writing off is called amortization.
You may also be interested in other articles from “accounting for depreciation” chapter:
- Definition and Explanation of Depreciation
- Causes of Depreciation
- Need for Depreciation
- Depreciation, Depletion and Amortization
- Difference Between Depreciation and Fluctuation
- Basic Factors of Determination of Depreciation
- Depreciation Methods / Methods for Providing Depreciation
- Fixed Installment Method / Straight Line Method / Original Cost Method
- Diminishing balance/written Down Value/Reducing Installment Method of Depreciation
- Annuity Method of Depreciation
- Depreciation Fund Method or Sinking Fund Method
- Insurance Policy Method of Depreciation
- Revaluation Method of Depreciation
- Sum of the Years’ Digits Method of Depreciation
- Double Declining Balance Method of Depreciation
- Depletion Method of Depreciation
- Basis of Use System of Depreciation
- Depreciation Of Various Assets
- Depreciation Accounting – General Questions and Answers
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