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What is the difference between amortization, depreciation, and depletion?

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تم إضافة السؤال من قبل HANNA SABA , Team Leader (Administrative Support), including translation, editing, and writing , Deloitte
تاريخ النشر: 2014/05/11
Muhammad Fiaz
من قبل Muhammad Fiaz , GROUP MANAGER ACCOUNTS, FINANCE AND TAX , SMPL Group of Companies

Depreciation: Upon Tangible assets of the company except land

Amortization: Upon intangible assets of the company

Depletion :     Allocation of cost of natural resources over time.

 

 

Divyesh Patel
من قبل Divyesh Patel , Assistant Professional Officer- Treasury , City Of Cape Town

In Financial Accounting, Depreciation, Amortization and Depletion have one major purpose, that is, to allocate the cost of an asset over its useful life.

 

Depreciation is used to expense assets such as buildings, vehicles, equipment, etc

Amortization is used to expense intangible assets such as goodwill, computer software, etc

Depletion is for natural resources such as timber and oil.

 

Sami Khan
من قبل Sami Khan , Bsuiness Lecturer , ONCampus London (CEG)

All these terms are related to Non-current (fixed) assets and related accrual concept.  The usage of fixed assets to be charged against profits during a period is calculated and these methods are technically called amortisation, depreciation or depletion as follows:

Amortisation = related to intangible assets, e.g. patents, copyrights, goodwill.

Depreciation = related to tangible assets, e.g. property, plant and equipment.

Depletion = related to natural resources, e.g. forests, mines, oil wells.

sibghat ullah shahab
من قبل sibghat ullah shahab , Deputy Manager Finance , Challenge Apparels Limited

amortizatin is decrease in values of intangible assets like formulas, goodwill, licences etc, Depriciation is decrease in value of non-current assets due to use or usage while Depletion is decrease in value of natural resources like mines etc

yara badawi
من قبل yara badawi , accountant , al alam

Amortization usually refers to spreading an intangible asset's cost over that asset's useful life  and on the other hand the depreciation refers to prorating tangible assets's cost over that assets's useful life and depletion refers to the allocation of the cost of natural resources over time.

Arsalan Bhatti
من قبل Arsalan Bhatti , Account and Administration officer , Barque Corporation

wo accounting approaches are used by companies involved in the exploration and development of oil and gas: the successful efforts (SE) method, and the full cost (FC) method. Each method handles differently the treatment of specific operating expenses associated with the exploration of new oil and natural gas reserves. DD&A, production expenses and exploration costs are recorded on a company's income statement. DD&A expenses charged to the income statement are determined by the "units-of-production" method.

Sheikh Moeed Farhat
من قبل Sheikh Moeed Farhat , Senior Accounting & Finance , WD Solutions Co. LLC (ODG)

Allocating cost of a tangible asset over its useful life less its value at the end of the life of the asset & charging it to Statement of financial performance, in each period.

Allocating cost of a intangible asset over its useful life & charging it to Statement of financial performance, in each period.

Allocating cost of natural resources (timber, minerals and oil) over its extraction period & charging it to Statement of financial performance, in each period.

In all three terms, Cost of Assets from a company's statement of Financial Position is transferred to Statement of Financial Performance, in each period.

Saad ullah
من قبل Saad ullah , Accountant , Mansour Al Mosaid Trading and Contracting Company

These all term use for calculate the residual value of assets but these use for different type asset.

Depreciation: it use for fixed asset like building ,machinery and  equipment.

DepletionIt  use for natural resources.

Amortization: this term is use for intangible asset.

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