physical exhaustion of a natural resource (e.g., oil, coal). The entry for recording annual depletion is to debit depletion expense and credit accumulated depletion. Accumulated depletion is a contra account to the natural resource.
process whereby the cost or other basis of a natural resource (such as a coal interest) is recovered upon the extraction and sale of the deposit. There are two ways of determining the depletion allowance: (1) cost and (2) percentage.
accounting treatment available to companies that extract oil and gas, coal, or other minerals, usually in the form of an allowance that reduces taxable income. Oil and gas limited partnerships pass the allowance on to their limited partners, who can use it to reduce other tax liabilities.
a dedication to account for reduced land value due to removing minerals.
Example: The land's value was reduced by depletion of its mineral resources.
