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What is Depreciation and how is it different from amortization
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Answer Posted / h.r. sreepada bhagi
Depreciation is the reasonable portion of the tangible fixed
assets (Capital Equipments) charged to Profit & Loss Account
of a particular financial period. Where as Amortization
refers to charging of a portion of the cost of intangible
assets like, Patents, Copy Rights etc. and Pre-operative or
Preliminary expenses to the Profit & Loss Account of a
particular financial period. Even writing off the Deferred
Revenue Expenditure over a reasonable period comes under
amortization. The basic principle is that money is spent in
a particular financial period but the benefit is derived
over many years & hence to match revenue & cost, these
costs/expenditures are charged against revenues over a
period of more than one year.
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