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Depreciation is calculated on the tangible asset suchh as..building , machinery....and Amortization on the intangible asset..like patent ,goodwill etc
Depreciation is use in tangible Assets which have physical appearance. Amortization is applied for Intangible assets which have no physical appearance e.g. software, goodwill etc
In easy words planned devaluation of tangible assets during its useful life is depreciation e.g. you purchased plant for $10,000 and you think useful life of plant is5 years. we charge assigned %age every year before yearly closure to know the value of asset. In this way lets make it20% depreciation every year. So after1 year value of asset will be9$8,000 in your books
Amortization is same process but is used for in-tangible assets such as shares
IAS16 (International Accouting Standard) for property plant equipment deals with depreciation i,e, depreciation on Tangible Assets(physical substance)Where as IAS38 Accounting for Intangible Assets Deals with Amortization of Intangible Assets(without physical substance) ...
Kindly go through these IAS' and also Read thoroughly the definations and illustrations ......
Depreciation is the wear & tear value of the fixed assets which we account as an expenses in the profit & loss account whereas the amortization of the expenses are the expenses which we write off or deferred in a period of financial years.
Both depreciation and amortization are methods that are used to prorate the cost of a specific type of asset to the asset's life. It is important to mention that these methods are calculated by subtracting the asset's salvage value from its original cost. Amortization usually refers to spreading an intangible asset's cost over that asset's useful life. For example, a patent on a piece of medical equipment usually has a life of17 years. The cost involved with creating the medical equipment is spread out over the life of the patent, with each portion being recorded as an expense on the company's income statement.Depreciation, on the other hand, refers to prorating a tangible asset's cost over that asset's life. For example, an office building can be used for a number of years before it becomes run down and is sold. The cost of the building is spread out over the predicted life of the building, with a portion of the cost being expensed each accounting year.
First one for fixed assets and another one for intangible assets
DEPRECIATION IS THE SYSTEMATIC PROCESS OF ALLOCATING THE COST OF A TANGIBLE ASSETS.WHILE THE AMORTIZATION IS THE PROCESS OF WRITE OFF THE DISCOUNT OF SHARE .
THIS IS THE MAIN DIFFERENCE B/W THESE TWO.