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Amortization & Depreciation Schedule

What is depreciation and amortization?

Both depreciation and amortization are ways of spreading the cost of something over a period of time, which is typically the useful life of the asset. Technically speaking, they are non-cash expenses because they are used to show the economic cost of outdating, wear and tear and the decline in value that most assets go through.

Depreciation is used to match the cost of obtaining an asset to the income a company will earn due to acquiring it. Given that it is used for tangible assets, examples of the assets that a company will use depreciation for include land, buildings, vehicles and equipment and machinery.

As for amortization, the purpose is also to match the cost of acquiring an asset with the revenue generated from it. Some of the intangible assets that amortization is used for include patents, franchise agreements, proprietary processes and organisational costs.

Amortization can also mean something else in a different context. For example, when making loan payments, an amortization schedule is used to pay the money back over a period of time.

You can learn about depreciation and amortization here.

What are the differences between depreciation and amortization?

The main difference between the two is that depreciation is used for tangible assets, whereas amortisation is used for intangible assets.

Furthermore, amortization almost always uses the straight-line method for costs so that the same amount of money is spent in each period of the useful life of the asset.

Tangible assets might have some value at the end of their life, so depreciation is calculated by subtracting the salvage/resale value from the original cost. This is in contrast to intangible assets, which do not have such a value.

Therefore, depreciation is implemented by depreciating the difference between the original cost and resale value over the expected life of the asset, which is usually done on an accelerated basis because more depreciation is seen in earlier periods. For example, if a company purchased a vehicle, the cost would be spread out over its expected life, with a portion being expensed in each accounting year.

You can learn more about the differences between depreciation an amortization here.

Where can I find depreciation and amortization Excel models?

For companies or individuals looking to use depreciation or amortization when purchasing assets, the Eloquens catalogue has a variety of models designed and built by professionals where all you need to do is input the required values. You can also build and self-publish your own model and template on Eloquens directly.

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