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The key difference between amortization and depreciation involves the type of asset being expensed. There are also differences in the methods allowed, including acceleration.
One of the biggest differences is that amortization expenses non-physical assets, better known as intangible asset s, while depreciation expenses physical assets, also known as tangible assets, over their useful life.
This article describes the main difference between depreciation and amortization. Depreciation is for tangible fixed assets whereas amortization is for intangible assets, however, in a way they are similar yet different at the same time.
Depreciation and amortization are both methods for recovering costs of business assets (property) over a number of years, with depreciation being used for physical assets and amortization used for intangible (non-physical) assets.
Amortization charges off the cost of an intangible asset over time, while depreciation performs the same function for a tangible asset.
Depreciation spreads out the cost of a tangible asset over its useful life, depletion allocates the cost of extracting natural resources, such as timber, minerals, and oil from the earth, and...
What's the difference between Amortization and Depreciation? Capital expenses are either amortized or depreciated depending upon the type of asset acquired through the expense. Tangible assets are depreciated over the useful life of the asset whereas intangible assets are amortized.
Course: Finance and capital markets > Unit 5. Lesson 3: Depreciation and amortization. Expensing a truck leads to inconsistent performance. Depreciating the truck. Depreciation in cash flow.
Key Differences Between Depreciation and Amortization. Now that we’ve explored both concepts let’s highlight the key differences: Asset Type: Depreciation applies to tangible assets (e.g., buildings, vehicles), while amortization applies to intangible assets (e.g., patents, trademarks).
Depreciation and amortization are both accounting methods used to allocate the cost of an asset over its useful life. Depreciation is used for tangible assets, such as buildings and equipment, while amortization is used for intangible assets, such as patents and copyrights.