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. 

You may also be interested in other articles from “accounting for depreciation” chapter:

1. Definition and Explanation of Depreciation
2. Causes of Depreciation
3. Need for Depreciation
4. Depreciation, Depletion and Amortization
5. Difference Between Depreciation and Fluctuation
6. Basic Factors of Determination of Depreciation
7. Depreciation Methods / Methods for Providing Depreciation
8. Fixed Installment Method / Straight Line Method / Original Cost Method
9. Diminishing balance/written Down Value/Reducing Installment Method of Depreciation
10. Annuity Method of Depreciation
11. Depreciation Fund Method or Sinking Fund Method
12. Insurance Policy Method of Depreciation
13. Revaluation Method of Depreciation
14. Sum of the Years’ Digits Method of Depreciation
15. Double Declining Balance Method of Depreciation
16. Depletion Method of Depreciation
17. Basis of Use System of Depreciation
18. Depreciation Of Various Assets
19. Depreciation Accounting – General Questions and Answers