harish .k (STUDING) (306 Points)
04 July 2012Hi... 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
Giridhar S Karandikar
(Team Lead)
(7548 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...
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.
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