Depreciation, Depletion and Amortization

12/08/2008 21:00

 

Depreciation, Depletion and Amortization:

Learning Objectives:

  1. What is the difference among depreciation, depletion, and amortization.

Depreciation:

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.

Depletion:

The term depletion is used for the depreciation of wasting assets such as mines, oil wells, timber trees etc.

Amortization

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.