Jasmeet_SethiCurious In: 1. Financial Accounting > Depreciation & Amortization Depreciation in spirit is similar to? Depletion Amortization Depression Share Facebook You must login to add an answer. Username or email* Password* Captcha* Remember Me! Forgot Password? Need An Account, Sign Up Here 1 Answer Voted Recent Simerpreet Helpful CMA Inter qualified 2021-07-20T14:51:52+00:00Added an answer on July 20, 2021 at 2:51 pm This answer was edited. The correct option is 2. Amortization. Depreciation in spirit is similar to Amortization because both depreciation and amortization have the same characteristics except that depreciation is used for tangible assets and amortization for intangible assets. To make it clear, intangible assets are those assets that cannot be touched i.e. they are not physically present. For example, goodwill, patent, trademark, etc. Hence, these assets are amortized over their useful life and not depreciated. Example for Amortizing intangible assets: A manufacturing company buys a patent for Rs 80,000 for 8 years. Assuming that the residual value of the patent after 8 years to be zero. The depreciation to be written off will be Yearly Depreciation = Cost of the patent – Residual value / Expected life of the asset. = 80,000 – 0 / 8 = Rs 10,000 every year. Whereas, tangible assets are those assets that can be touched i.e. they are physically present. For example, building, plant & machinery, furniture, etc. Hence, these assets are depreciated over their useful life and not amortized. Example of Depreciating tangible asset: A manufacturing company bought machinery for Rs 8,10,000 and its estimated life is 8 years, scrap value being Rs 10,000. The depreciation to be written off will be Yearly Depreciation = Cost of machinery – Scrap value / Expected life of the asset. = 8,10,000 – 10,000 / 8 = 8,00,000 / 8 = Rs 1,00,000 every year. 0 Share Share Share on Facebook Share on Twitter Share on LinkedIn Share on WhatsApp Related Questions What are some examples of deferred revenue expenses? Are brands intangible assets? What comes in debit side of Realisation account? What is recorded in the Realisation account? What is not included in Realisation account? What is recorded on the credit side of a Realisation account? Can accounts payable have a debit balance?