Question

Distinguish among depreciation, depletion, and amortization.

Short answer

Answer

The differences between the terms depreciation, depletion, and amortization are that they imply a cost allocation of different types of assets.

Step-by-step solution

Meaning of Depreciation 

Depreciation is a branch of accounting that systematically spreads or divides the cost or other principal value of a fixed assetover its expected useful life by charging regular expenses or revenues.

Explaining the distinction between depreciation, depletion, and amortization

The phrases depreciation, depletion, and amortization differ in that they all refer to the cost allocation of different categories of assets. Depreciation shows that the carrying value of tangible plant assets has dropped. The word depletion is used when natural resources (wasting assets) such as lumber, oil, coal, and lead are involved. Amortization is the term used to describe the process of intangible assets such as patents or copyrights expiring.