Depletion refers to the allocation of the cost of natural resources over time. For example,
an oil well has a finite life before all the oil is pumped out. Therefore, the oil well’s setup
costs are spread out over the predicted life of the oil well.
Depreciation is an accounting method of allocating the cost of a tangible asset over its
useful life. Businesses depreciate long-term assets for both tax and accounting purposes.
Amortization is an accounting term that refers to the process of allocating the cost of an
intangible asset over a period. It also refers to the repayment of loan principal over time.