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Amortaisation and Depreciation

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Submitted By khankhankhan
Words 760
Pages 4
Amortization usually refers to spreading an intangible asset's cost over that asset's useful life. For example, a patent on a piece of medical equipment usually has a life of 17 years. The cost involved with creating the medical equipment is spread out over the life of the patent, with each portion being recorded as an expense on the company's income statement.

Depreciation, on the other hand, refers to prorating a tangible asset's cost over that asset's life. For example, an office building can be used for a number of years before it becomes run down and is sold. The cost of the building is spread out over the predicted life of the building, with a portion of the cost being expensed each accounting year

What is Depreciation?
Depreciation is method of recovering the cost of a tangible asset over its useful life. The desk I mentioned above, for example, is depreciated, as is a company vehicle, a piece of manufacturing equipment, shelving, etc. Anything that you can see and touch and that lasts longer than a year is considered a depreciable asset (with some exceptions, of course).
What is Amortization?
Amortization is the same process as depreciation, only for intangible assets - those items that have value, but that you can't touch. For example, a patent or trademark has value, as does goodwill. To add to the confusion, amortization also has a meaning in paying off a debt, like a mortgage, but in the current context it has to do with business assets.

Revenue is the amount received by the business from selling main goods or services to its customers during the period. Revenue is the resultant of such activities which actually defines the reason of existence of business. For example, a car dealer’s real business is selling cars. Whatever amount he will receive from the customers on selling cars will be his revenue.
Income is term which is loosely

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