and in your own words the purpose of Depreciation Amortizati

and in your own words the purpose of Depreciation, Amortization and Depletion. Describe in detail Also distinguish between straight-line, units of production and double-declining depreciation. Chapter 10 Discussion: Plant Assets, Natural Resources and Intangibles O Due July 20 at 11:30 PM WE

Solution

Depreciation is the systematic allocation of allocation of depreciable amount of an asset over its useful life.

PPE represents expenses which are expected to bring yield economic benefits to the entity in the future, and for a period of over one year. Depreciation represents the write off of this expenditure to the profit and loss account, in line with the pattern of economic benefits it provides to the entity.

Amortisation is similar to depreciation, but the term is used more for intangible assets whereas depreciation is used for tangible assets.

The term depletion is akin to depreciation, but is generally used for assets like mining and extraction rights. As and when minerals are extracted from mines, the mines deplete and therefore, the term depletion is used.

The entity selects the method that most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. That method is applied consistently from period to period unless there is a change in the expected pattern of consumption of those future economic benefits.

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