Question

You are looking at the profit and loss account of three business enterprises. You
find the term depletion in first case and amortisation in third case. State the type
of business of two enterprises are into.

Answer 1

Both the enterprises are into- the exhaustion of the natural resources and a specific contract and fixed assets business.  

Explanation:

-The term 'depletion' is used in accounting for the purpose of deduction or depreciation of a product's reserves. This is used in many businesses such as farming, mining, and fishing.  

Hence, the use of the term named depletion in the profit and loss account of first business case, shows that the business is into the exhaustion of the natural resources.

-Another term is 'amortization' which is used in the third case, means spreading of the payment  by writing-off the asset's initial cost gradually. This is used for reducing the firm's debt with asset's amortization.

Hence, the use of term amortization in the account of third business case, shows that the business is into a specific contract and fixed assets business.