Depreciation vs Amortization
Definition
Both spread an asset's cost over its useful life, but depreciation applies to tangible assets like equipment, while amortization applies to intangible assets like patents and to loan principal repayment.
Related Terms in Core Accounting
Carriage Inward and Outward
Carriage inward is the freight cost of bringing purchases into the business, added to the cost of goods; carriage outward is the cost of delivering goods to customers, treated as a selling expense.
Bank Reconciliation Statement (BRS)
A statement reconciling the balance in a business's cash book with the balance on its bank statement, explaining differences such as unpresented cheques, deposits in transit and bank charges.
Closing Stock
The value of unsold inventory at the end of an accounting period. It reduces the cost of goods sold for the period and is carried forward as the opening stock of the next.
Opening Stock
The value of inventory a business holds at the start of an accounting period, carried over from the prior period's closing stock. It is added into the cost of goods sold calculation.
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