Definition of Depletion
In accounting, depletion refers to the expensing of a company’s cost of a natural resource. Ultimately, it means moving a natural resource’s cost from the company’s balance sheet to the company’s income statements as the natural resource is being sold.
The objective of depletion is to match the cost of the natural resources that were sold with the revenues from the natural resources that were sold.
Conceptually, depletion is similar to the depreciation of property, plant and equipment.
Examples of Depletion
Examples of depletion involve the logical expensing of a company’s cost of natural resources such as oil, natural gas, coal, metals, stone, etc.
