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How is the difference between wear and depreciation

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What is the difference between wear and tear</a>

The concepts of depreciation and amortization have much in common and are associated with the depreciation of production assets.

Meanwhile, they are not identical and they should be distinguished from each other.

The concept of depreciation and amortization

A significant share of the company's costs is associated withCosts for capital resources (equipment, premises). Their peculiarity is that they are not spent for one production cycle, as raw materials, but serve for years. But they are subject to wear.
Wear is the process of losing an objectCharacteristics, resulting in a decrease in its value and depreciation. It can concern such basic means of the enterprise, as the equipment, buildings, transport and so forth.
In the economic sense, the physical andobsolescence. Physical wear associated with depreciation of property when it lost its properties as a result of aging when using this property. It is calculated as the ratio of the asset's operating time to the normative service life of the asset. Moral depreciation occurs as a result of a partial loss of fixed assets by its fixed assets as a result of the appearance of new more advanced technologies or under the influence of other factors.
Amortization is a processPartial transfer of the cost of fixed assets as they wear to the cost of products. It is carried out using depreciation rates.
There is a so-called core circuitFunds. It includes three stages: depreciation, amortization and reimbursement. Depreciation and amortization are carried out during the use of fixed assets in production, compensation - when they are created and restored.

Comparison of depreciation and depreciation

Based on a comparison of the concepts of depreciation and depreciation, the following differences can be distinguished:
- on the time of the offensive - depreciation is accrued as a result of depreciation of fixed assets, i.e. Is its consequence-
- depreciation is the monetary equivalent of depreciation of fixed assets, whereas depreciation does not have a monetary expression-
- depreciation does not necessarily depend on the levelWear - at the facility can be fully depreciated value, while it has not yet been subjected to complete physical deterioration and is subject to future use, there are also reverse situations - when the equipment fails before it is fully written off its value-
- companies can independently determine the depreciation-
- in accounting, the term depreciation is not used, only - depreciation-wear - a concept from the field of financial analysis-
- The term depreciation is fixed by law, whereas the legal definition of wear is absent-
- depreciation - decrease in the value of fixed assets andThe depreciation of equipment, and depreciation - the transfer to the value of manufactured products, which allows you to restore the fund of fixed assets.

How is the difference between wear and depreciation Was last modified: May 23rd, 2017 By Rupvyilc
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