What is depreciation and amortization

Question

Accepted Answer

Depreciation and amortization are accounting methods used to allocate the cost of tangible and intangible assets over their useful lives.

Depreciation is the allocation of the cost of tangible assets (such as buildings, machinery, vehicles) over their useful lives.
Amortization is the allocation of the cost of intangible assets (such as patents, copyrights, trademarks) over their useful lives.
Both depreciation and amortization are non-cash expenses that reduce the reported income of a company.
Depreciation is usually calculated using methods like straight-line, double declining balance, or units of production.
Amortization is typically calculated using the straight-line method.
Examples of depreciation include a company spreading the cost of a new factory building over 20 years, while examples of amortization include spreading the cost of a patent over its 10-year useful life.

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