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top   »  business   »  business costs   »  business expenses   »  amortization   »  amortization vs depreciation

Amortization vs Depreciation

 , updated on July 11, 2023
Amortization and depreciation are both methods for accounting for capital costs over a period of time as defined by applicable tax regulations. The term amortization is used for the costs of intangible capital assets such as goodwill. The term depreciation is used for the costs of tangible assets such as buildings and equipment.
Business expenditures are classified as either capital or operational costs. Capital costs are long term investments in a business that are depreciated or amortized. Operational costs can be deducted when they occur.
Overview: Amortization vs Depreciation
Area
Business Cost
Amortization Definition
The process of accounting for the cost of intangible capital assets over the term specified by applicable tax regulations.
Depreciation Definition
The process of accounting for the cost of tangible capital assets over their useful life.
Related Concepts
Tangible Assets
Intangible Assets
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