Amortization vs. Depreciation

Both

• Amortization and depreciation are two methods of calculating the value for business assets over time.

Amortization

• Amortization is the practice of spreading an intangible asset's cost over that asset's useful life.
• Intangible assets include:
• Patents and trademarks, franchise agreements, copyrights, cost of issuing bonds to increase capital, organizational costs, etc
• Typically expended on a straight line basis 
• meaning the same amount is expended in each period over the asset's useful life

Depreciation

• Depreciation is the expensing of a fixed asset over its useful life. Fixed assets are tangible assets
• Tangible assets include: 
• buildings, equipment, office furniture, vehicles, land, machinery, etc
• Depreciation of some fixed assets can be done on an accelerated basis 
• meaning that a larger portion of the asset's value is expensed in the early years of the asset's life. 
• For example, vehicles are typically depreciated on an accelerated basis.