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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.
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.
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.
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
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.
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.
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.
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.
Depletion: It use for natural resources.
Amortization: this term is use for intangible asset.
