What is the difference between depreciation and amortization?
An example of an AI chatbot conversation about depreciation vs amortization.
What is the difference between depreciation and amortization?
Depreciation refers to the reduction in value of tangible assets over time, while amortization applies to intangible assets.
Can you give me examples of each?
Sure! An example of depreciation is a vehicle losing value over years. Amortization could be a patent's cost spread over its useful life.
How do businesses account for these in their financial statements?
Businesses record depreciation as an expense on the income statement, reducing taxable income. Amortization is treated similarly for intangible assets.
Are there different methods for calculating depreciation?
Yes, common methods include straight-line, declining balance, and units of production. Each has its own calculation approach.
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