What is Amortisation? What is the difference between
depreciation and amortisation?
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Answer Posted / b.thirupathi
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 of
17 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.
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