Depletion in Accounting

Depletion in Accounting is a technique, which used to allocate the cost of extracting natural resources such as timber, minerals and oil from the earth. The concept of depletion of natural resources is similar to the depreciation of fixed assets. It is similar to depreciation in that it is a cost recovery system for accounting and tax reporting. It’s equation is somewhat different than a typical depreciation formula because it have to figure out an average price per unit first.