Crash Course in Accounting and Financial Statement Analysis, Second Edition

What Is the Difference between Depreciation and Amortization?

Depreciation is associated with fixed (physical) assets. Amortization is associated with acquired intangible (not physical) assets.

13. Amortization

Exercise Q1: Which of the following need to be amortized, depreciated, or neither? Automobile ________________ Power plant ________________ Acquired company’s brand name ________________ Brand name of an internally generated business ________________ A piece of land used to build a warehouse ________________

13. Amortization

Solution 1: The following need to be amortized, depreciated, or neither: Automobile depreciate Power plant depreciate Acquired company’s brand name amortize Brand name of an internally generated business neither A piece of land used to build a warehouse neither