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Despite its differences in presentation, depreciation, depletion and amortization are used as a basis to allocate the historical cost of an asset over its useful life in order to conform with the idea that the earnings of the company is matched accordingly with relative expenses including the wear and tear of the assets used in production, operations and other administrative purposes.
Depreciation
Depreciation is the systematic allocation of a tangible's asset historical cost less its expected residual or salvage value over its estimated useful life. Depreciation can be measured using a variety of methods the most basic of which is the straight line method.
Depletion
Depletion is the systematic allocation of a wasting asset's depletable cost over the period wherein the natural resources are extracted and put into production.
Amortization
Amortization in accounting is defined as the systematic allocation of an intangible assets cost or revalued amount minus its residual value (if any) over the useful life of the intangible asset.
