By Admin on Aug 22, 2009 in Corporations
Anyone pls show me what is difference between depreciation and amortization in Balance sheet & Cash Flow State
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Depreciation is how much less something is worth with the passage of time. A car will depreciate 20% or so as soon as it is bought. Amortization is how much you must pay to pay for an item over time. They are not at all related.
Nelson_DeVon | Aug 24, 2009 | Reply
Tangible assets are depreciated, intangible assets are amortized. That’s essentially the only difference, for the purpose of answering your question.
Dep & Amort can be greater in cash flow statement than what appears on the BS if there were disposals of assets.
Say a company has $70,000 of computer equipment on Jan 1, and sells it on August 1. They might have had $9000 in depreciation from 1-1 to 8-1 on that equipment. That is an expense, and that $9000 will appear on the 12-31 cash flow statement for the year (a contra-account; “increasing” cash flow). However, the $9000 will not be included on the BS, because those assets are no longer on the BS (because neither is the accumulated depreciation of them.)
The BS includes accumulated depreciation, not depreciation expense. The cash flow stmt is the opposite. It contains depreciation expense, not accum dep. Same thing for amortization. Hope I made that understandable.
scudstudbob | Aug 25, 2009 | Reply