Before understanding the accounting term accumulated depletion, you must understand depletion. Depletion is just like depreciation and we can define it as loss of natural resources and In USA GAAP, it is deduction out of total cost of respective natural resource like mine , timber, petroleum , oil and gas wells . Depletion may happen during the time of quarrying, drilling, or felling the natural raw material from natural sources.
Formula for calculating depletion
= investment amount for production X Product value which is produced /total production life time
Suppose one company invests $ 1000 for cutting of woods and total output is 2000 quintals but company produce timber of 50 quintals first year
Then the value of depletion = $1000 X 50 /2000 = 25$
If this depletion is not deducted from asset but shown it as liability side of balance sheet. Then this is called accumulated depletion.
Formula for calculating depletion
= investment amount for production X Product value which is produced /total production life time
Suppose one company invests $ 1000 for cutting of woods and total output is 2000 quintals but company produce timber of 50 quintals first year
Then the value of depletion = $1000 X 50 /2000 = 25$
If this depletion is not deducted from asset but shown it as liability side of balance sheet. Then this is called accumulated depletion.
