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

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