At the end of every financial year, it is essential to calculate the company's asset value for the essential annual reports and tax purposes. There are two ways to calculate this value; depreciation and amortization. So, when a company buys an asset such as real estate or other assets, the difference between the two methods should be understood. Amortization is the method that is used to decrease the cost of the asset over time, while depreciation is the loss in value of the asset over time. This understanding helps in better understanding the financial implications of the purchase and saving time, effort, and money. The two calculations are important to calculate the tax liabilities and deductions over the asset's life.