Is there a difference between Amortisation and depreciation?

Fixed assets rarely last forever and in accounting is a process to reflect the use of an asset which lasts for more than one year.

The process reflecting the use of an asset is either amortisation or depreciation.  There are essentially the same but the term you use depends on the asset in question.

Amortisation

Amortisation is the method of spreading the cost of an intangible asset, an asset with has no physical state.  Intangible assets are things like:

  • Goodwill
  • Patents
  • Trademarks
  • Copyrights

What is Amortisation and How to Calculate It

Depreciation

Depreciation applies to tangible fixed assets, which have a physical state.  Here are some examples of tangible fixed assets:

  • Computers and laptops
  • Furniture
  • Equipment

How to Calculate Depreciation

Anita is a Chartered Accountant, turned blogger and creator of the ever popular free Go Self Employed Email Mini Course, which has been completed by hundreds of attendees all over the UK. Using her 10 years experience in accounting, tax and operations for Small Businesses, Anita is on a mission to make finance simple for the self employed, so they can stop stressing about tax & finances and focus on building profitable businesses which will give them the lifestyle they dream of.