What are 'depreciation' and 'amortisation' all about? - MoneyWeek Investment Tutorials

Investors can easily be bamboozled by accounting jargon such as depreciation and amortisation. Here Tim Bennett explains what these words mean and how to deal with them.

[shauna]

Finally someone who explains it clearly.

[luisspencer]

Bravo! I’ve seen 6 videos on this so far and yours takes the Charlie!

[kerriemariah]

this is presented in such an understandable way - thank you for doing this!

[daoudidris]

Very well spoken and understandable.
Thank you

[chrisschmidt]

absolutely brilliant. So many concepts I didn't fully understand now made simple

[pastormarkhibbert]

This is a great video! It really helped me understand Amortization of a project

[irfaana.b.]

Ok so basically (do correct me if I'm wrong),

depreciation is basically the cost of the asset divided by the number of years that the asset will last. So 1M dollars for an ice cream machine, directors decide that the machine can only maintain its quality for 10 years so they spread 1M over a span of 10 years:

1M /10years = $100k a year.

Also. Directors could decide/estimate that the Icecream machine might be worth $200k at the end of 10Years, so they will only charge the profit and loss account (currently 100k Yearly) with the cost of using the asset in a year (in that 10yr period);

so instead of 1M its 1M - 200K so 800K/10 years = 80k a year.
profit and loss account is now 80k a year.

ps. like ur top, sir.

[edwardsheefeni]

Thank you very much. I was confused of these terms while preparing my business financial forecast. But I very clear about it now.
Thank you very much.

[lildesderman]

Appreciate that Drake & Josh intro

[diegocaicedo]

Broader explanation. It goes into some details and examples, so I think It is a relevant video, nonetheless, could limit the variety of concepts into a straight and brief definition. Good Work!

[MickySupreme]

Nice shirt dude! + Great information! Thanks, you helped!

[udaynataraaj]

Excellent...with love respect from India.👍

[phillipharrison]

love it!

just wondering where the intial transaction of £1 million would appear? or would the asset be paid off annually over 10 years to match the amortisation schedule (presumably reinforced by a manufacturers guarantee that the machinery would be actually be usable for the full period of 10 years as in this example)?

[sayitasis]

sir, thanks for the video, however I would to like to point out is that you do not depreciate land

[andydidyouhear]

Hello Tim, this is a great video, as always. Have you considered making one on factoring?

[jimmyzhou]

Great videos, very well explained in laymen's vocabulary. Can you please do an explanatory video on the black scholes options pricing formula? Thanks.

[goto]

not fabulous at dinner parties?? Good sir, you have messed with the wrong pencil pusher

[Nauman_]

Why we amortize intangible assets, Normally the value increases like, Goodwill, Patent etc. they increase over period of time.

[leesmith]

took me about 4 rewinds to work out "you can kick". then a few more seconds to work out he means physical things. why not just speak plainly without viewers needing to decipher what it is you're saying.

[philippezoghzoghi]

Is amortization used for tax deduction?