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Difference between amortization & depreciation as per as26

harish .k (STUDING) (306 Points)

04 July 2012

Hi... friends

i have a query regarding AS 26 difference between Amortization and Depreciation and the method of Accounting in the books of Accounts ... plz explain

Regards

harish

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3 Replies

Giridhar S Karandikar (Team Lead) (7543 Points)
Replied 04 July 2012

Amortization & depreciation are the two names given whihc serves the same purpose. the term Depreciation is used when you are writing-off wny tnagible asset such as Plant & machinery, furniture etc.. each year to the P&L A/c. Wehreas the term amortization is used when you writing-off any intangible asset such as Patents, Copyrights,trademarks etc...

harish .k (STUDING) (306 Points)
Replied 05 July 2012

Thank you sir ...

Nithin Chettoor (Assistant Manager) (388 Points)
Replied 03 December 2012

As per AS 6 - Depreciation is a measure of the wearing out, consumption or other

loss of value of a depreciable asset arising from use, effluxion of time or

obsolescence through technology and market changes. Depreciation is

allocated so as to charge a fair proportion of the depreciable amount in each

accounting period during the expected useful life of the asset. Depreciation

includes amortisation of assets whose useful life is predetermined.

AS 26 - Amortisation is the systematic allocation of the depreciable amount of

an intangible asset over its useful life.

Here are the definitions of Depreciation and amortisation, both serves the same purpose but one is used in relation to tangible assets because Depreciation is a reduction in the carrying amount due to wear n tear, continuous use and efflux of time. Intangible assets doesnt depreciate due to wear and tear or any such things which affects tangible assets. But it has an useful life, so we are apportioning or allocating the cost over the useful life.