Showing posts with label Depreciation. Show all posts
Showing posts with label Depreciation. Show all posts

Similarities and differences among Depreciation, Depletion and Amortization

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Depreciation is the systematic and rational allocation of tangible and current asset cost over the periods benefited by the use of the asset. 

Depletion is the periodic allocation of the cost of natural resources.

Amortization is the periodic cost allocation process for intangible assets.
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Physical Depreciation VS Functional Depreciation

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All plant/fixed assets, except land, depreciated. Factors that contribute to depreciation are physical and functional. Physical depreciation arises from the actual use of a plant asset. Functional depreciation is due to obsolescence factors such as technological advances and less demand for a product.
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