Depletion (Financial Accounting)

This video explains what depletion is in the context of financial accounting. An example is presented to illustrate how natural resource assets are depleted over time, along with the effects on the balance sheet and income statement and the associated journal entries.
-
Edspira is the creation of Michael McLaughlin, an award-winning professor who went from teenage homelessness to a PhD. Edspira’s mission is to make a high-quality business education freely available to the world.
-
SUBSCRIBE FOR A FREE 53-PAGE GUIDE TO THE FINANCIAL STATEMENTS, PLUS:
• A 23-PAGE GUIDE TO MANAGERIAL ACCOUNTING
• A 44-PAGE GUIDE TO U.S. TAXATION
• A 75-PAGE GUIDE TO FINANCIAL STATEMENT ANALYSIS
• MANY MORE FREE PDF GUIDES AND SPREADSHEETS
eepurl.com/dIaa5z
-
SUPPORT EDSPIRA ON PATREON
* / prof_mclaughlin
-
GET CERTIFIED IN FINANCIAL STATEMENT ANALYSIS, IFRS 16, AND ASSET-LIABILITY MANAGEMENT
edspira.thinki...
-
LISTEN TO THE SCHEME PODCAST
Apple Podcasts: podcasts.apple...
Spotify: open.spotify.c...
Website: www.edspira.co...
-
GET TAX TIPS ON TIKTOK
/ prof_mclaughlin
-
ACCESS INDEX OF VIDEOS
www.edspira.co...
-
CONNECT WITH EDSPIRA
Facebook: / edspira
Instagram: / edspiradotcom
LinkedIn: / edspira
-
CONNECT WITH MICHAEL
Twitter: / prof_mclaughlin
LinkedIn: / prof-michael-mclaughlin
-
ABOUT EDSPIRA AND ITS CREATOR
www.edspira.co...
michaelmclaugh...

[@gbmacbook4364]

How does this video have 45K views and 298 likes? I can confidently say that this is the greatest resource on the internet. Thank you very much professor. These videos are incredible. I am grateful.

[@serenequeensubliminals]

WHY IS THIS VIDEO SO UNDERRATED, this was the only vid i could find on TH-cam that explained this and not only that but the explanations are simple and understandable and literally what seemed so complicated became so easy thanks alot you are wonderful at teaching, hope you get more recognition, and have an amazing life❤

[@MyFinancialFocus]

Journal entries can get complicated. Glad we have debits and credits to make it easier :)

[@francescociccone2224]

in reality, if I can say my opinion, the US version of "debit/credit" is a little bit weird, bcs they simply reverse the italian version that has an easier way to be understood, infact, in italy we have credit on the left and debit on the right. and if you think about the credit's J.E., the reason of being on the left is a way better bcs when y receive it, they are on the left, and when y receive it, they are on the right. I mean, on italy, the professors teaches to you that this is like "when you have a credit they are giving y an apple, and when you receive the credit, you are giving it back" (it's like the movement of the hands, but with the credits).
I hope I have made myself understood.

[@leahk7057]

Thank you, Sir!
The best explanation!

[@janellebarbour4565]

Great video...but could you also do an example when the there is the cost of production that excludes the depletion rate?

[@munisowenby2136]

Very insightful and helpful explanation. Thank you!

[@Edspira]

No problem!

[@meera2038]

Instead of debiting Inventory, can we debit depletion expense?

[@sebastiansotelo8166]

You're the best! Thank you so much for all your videos :)

[@malikubaid1913]

please share deprecation rate on personal fixed assects

[@Jason-zr6om]

So the depletion rate never changes???

[@HafezAcademy]

that's really amazing explanation

[@arahopalec6892]

It really helps ! Thank you !

[@SubhashChandraDey-h2m]

Thank you sir

[@evanzack2142]

thank you

[@telete6456]

Thank you so much😍

[@layben1957]

Thank you! Great job!

[@AMA949]

The best!

[@sebsibetasfye5009]

Mingi of in amarc

[@shamaribenton]

Hey, Thanks for the video but I'm not sure why inventory would increase to 100,000. If the mining company extracted 50,000 tons of ore shouldn't the value of that be the inventory? I don't understand why you are multiplying the cost per depletion (2$ per ton) by the 50,000 of ore to come up with inventory value. That doesn't make sense.

[@Edspira]

Shamari Benton What we need to do is allocate the cost of the natural resource to accounting periods. The fair value of the ore doesn't come into play until we recognize revenue. The revenue (derived from fair value) minus the cost (derived from depletion) will tell us how much profit the mining company made.

[@andybotchwey4620]

The value is based on the the depletion base. The 50,000 produced is just the quantity not value. The $2 is the predetermined valuation of the all the ounces available.

[@Ankit_1969]

Angreji mat bol

[@jokousita]

Thanks sir!