DEPRECIATION AND AMORTIZATION

To understand the importance of depreciation and amortization is essential to understand that each one is used for accounting purposes, depreciation is the term most often used to imply that the tangible assets of the plant has fallen in service potential. When natural resources like timber, oil and coal are the active use of the term burnout. Upon termination of a tangible asset, such as patents and goodwill, is called amortization.

DEPRECIATION
Is to reduce the historical value of property, plant and equipment for their use or obsolescence. The contribution of these assets for income generation of economic entity should be recognized periodically through the depreciation of its historical value set. To calculate the depreciation of property, plant and equipment is necessary to estimate its useful life, and where significant residual value.
The periodic depreciation should be determined in a systematic and technical value recognized methods such as straight line, sum of years digits, units of production or the one that best meets the basic rule of association.

Causes of depreciation
1 .- The physical life of the asset, and includes the reasons why:
• Exhaustion
• Wear
• Aging
2 .- The economic life of the asset, and includes the reasons why:
• Exploitation Limited Time
• Technical Ageing
• economic Ageing
3 .- The duration of the asset under accounting, and includes the reasons why:
• Consolidation
• Dividend policy
• Tax Policies

The asset is removed for two reasons: physical factors (such as accidents or termination of life) and economic factors (obsolescence).
Physical factors are wear, damage, breakage and accidents that prevent the active work indefinitely.
Economic or functional factors can be classified into three categories: impaired (the asset ceases to be useful to the company), replacement (replacement of the asset by another more efficient) and the obsolescence of the asset.
Calculation of depreciation
In order to calculate the depreciation must be taken into account:
• The value to depreciate
• The value of residual or salvage
• The lifetime
• The method to be applied

AMORTIZATION
This name is the representation of currency depreciation accounting in the course of time will develop the assets.

The depreciation has a very clear economic sense for the company, because if it does not pick up the loss in value experienced by its assets, the benefit would be fictional and the company would decapitalizing (not have resources to renew its assets when needed.)

Classification of depreciation
• Ordinary depreciation: the systematic devaluation of the property previously determined by the company.
• Special Depreciation: depreciation is the total or partial unexpectedly well, for example, caused by an accident.

Some forms of depreciation are:
or payment of a debt by the creditor consecutive payments.
or gradual extinction in books of an insurance premium or bonus.
o Reduction in the carrying value of an item of fixed assets. or depreciation or depletion
Low or carrying 

MAGALY MARTINEZ

LUCY AGUILERA