Register now or log in to join your professional community.
Depreciation is charged on tangible assets against their usefull life, whereas amortisation is charged on intangible assets like goodwill
Very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally expended based on the time period over which the asset was used. Both depreciation and amortization (as well as depletion) 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 expended each accounting year.
Depreciation:
Is a shortfall in the value of the progressive fixed asset except land (her rate of force - such as mine) and this shortfall for the year and appear as an expense in the income statement.
amortization:
Is the lack of a gradual originally undisturbed like Goodwill - Patent - Establishment expenses - expenses Deferred revenue (advertising campaign) expenses of renovation shows (decorations, flooring), Research and development expenses (pharmaceutical companies)
Depreciation is the scheduled charging to expense of a tangible asset over its useful life. Amortization is the scheduled charging to expense of an intangible asset over its useful life. Thus, the key difference between amortization and depreciation is that one relates to intangible assets, and the other to tangible assets.
Depreciation refers to the wear and tear of a tengable asset with the passage of time. While the same wear and tear on the un-tengable assets are known as amortization.
Depreciation:
Is
Physical assets decreasing
amortization
Is decreasing the value of intangible assets
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.
depreciation is the extending of fixed asset on all of his operating life
amortization is the extending of intangible assets such as Goodwill
depreciation charged on tangible assets while amortization can of intangible assets as well as of expenses.
The gradual decrease in tangible assets is called depreciation and amortization means gradual decrease in intangible asset.
Fixed assets like cars machines need to depreciated due to use of these assets in operation
It's normal to decrease in value
Intangible assets like goodwill or software
Need to be decreased in value because it has limited life time and amortized due to asset life
Do you need help in adding the right keywords to your CV? Let our CV writing experts help you.