Depletion is an accounting method used to allocate the cost of natural resources, such as minerals, oil and gas reserves, timber, or other finite resources, over the period in which they are extracted or consumed. It is primarily used in industries involved in the extraction or exploitation of natural resources.
The process of depletion involves recognizing and recording the reduction in the value of the natural resource as it is extracted or used up. This reduction in value is considered an expense to the company and is recorded on the income statement. The purpose of depletion is to match the cost of extracting or consuming the natural resource with the revenue generated from its sale.