Financial StatementsIntermediate

Depreciation & Amortisation

D&A

The yearly charge that spreads the cost of long-lived assets over their useful life.

Detailed explanation

Depreciation applies to physical assets like machines; amortisation to intangibles like software or licences. It is a non-cash expense, which is why it is added back in cash flow and EBITDA.

Formula

Straight-line depreciation = (Cost − Salvage value) ÷ Useful life

Example

Machine ₹10 cr, salvage ₹1 cr, life 9 years → ₹1 cr per year.

Why it matters

Explains the gap between accounting profit and cash generated.

Key points

Non-cash charge.
Reduces taxable profit.
Added back in EBITDA and operating cash flow.

Related terms

EBITDA Capex

More in Financial Statements

Income Statement Revenue Cost of Goods Sold Gross Margin EBITDA EBIT

Educational content only. Definitions and examples are illustrative and are not investment, tax or legal advice.