– What is depreciation/amortization on financial statements
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I think the question is more about accounting than economics.
Depreciation caused by equipment and building (tangible assets) wear down over time. After using a $3000 car for 30 years, it will not fit for business and need to be replaced. Because of that, every year you add $100 to “Depreciation – Car”. It will get a little more complicated because there are other methods to calculate depreciation, and some assets have residual values.
Amortization is depreciation but for intangible assets. Patent, Trademarks, Copyrights, etc. All of them have some sort of lifespan and value. Basically, divide their value by lifespan and you get the amount to be amortized each year.
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