It refers to the process of estimating and recording the periodic charges to operations owing to the exhaustion of natural resource such as mines, quarries, etc. that reduces the availability of the quantity of the material or asset.
For example, if a business enterprise is into mining business and purchases a coal mine for Rs. 10, 00,000. Then the value of coal mine declines with the extraction of coal out of the mine. This decline in the value of mine is termed as depletion.
The main difference between depletion and depreciation is:
That the former is concerned with the exhaustion of economic resources, but the latter relates to the usage of an asset.
In spite of this, the result is erosion in the volume of natural resources and expiry of the service potential. Therefore, depletion and depreciation are given similar accounting treatment.