Phoenix Associates Land Syndicate (fka PBLSQ)

[Jambamboo]

First you need to understand accounting 101 for mining operations. When the asset is put on the books the company usually has a engineer put a value on the product that is in the ground. This is usally based upon a measurement tool that is then converted into dollars. For example it is probably in tonnage. The estimate the tonage and then multiply by a cost factor and this will provide you with the balance sheet value that is the cost of the product you are about to mine.

Now how to you account for mining the product, this is where your deplection account comes in, so your mineral reserve account should remain the same unless you find additional mineral reserves or buy new land that has additional reserves. The you have your depletion account which tracks the usage of the minerals. So take the mineral reserves minus the deplection and this should provide you with the estimate of how much minerals are left.

It works similar to depreciation but depletion is a much more tangible valuation tool in that you are subtracting what you use rather than subtracting some pre-determined useful life of an asset as depreciation accounts for.

I hope this makes sense now to you.