Difference Between Depreciation And Amortization

1. Depreciation is the systematic allocation of the cost of an Tangible Non Current Asset over its useful life while Amortization is the systematic allocation of the cost of an Intangible Non Current Asset over its useful life. So, Depreciation is used for Tangible Non Current Assets while Amortization is applied on Intangible Non Current Asset.

You may also Read Out, “Similarities Between Depreciation And Amortization”

2. Depreciation is charged on any Tangible Non Current Asset whether its cost is low or high while amortization is charged on those Intangible Non Current Assets which need Significant Cost (Very High) in developing or acquiring and it depends upon the market trends.

So after studying above comparison, we can say that the term “Depreciation” is used for Tangible Non Current Assets while Amortization is used for Intangible Non Current Assets, otherwise these two terms are used for the same purpose i.e., allocation of the cost of an asset over its useful life.