DEPRECIATION

METHODS
By Mohamed Samir Rashed
CMA , IFRS Chief Accountant
LINKEDIN INFLUENCER

mohammedsamir947@gmail.com
 TABLE OF CONTENT

STRAIGHT-LINE DOUBLE-DECLINING SUM-OF-YEARS- UNITS OF PRODUCTION MACRS

BALANCE DIGITS DEPRECIATION DEPRECIATION

By Mohamed Samir Rashed

 WELCOME TO
MY PRESENTATION
Depreciation is the process by which a company spreads the cost of a long-term asset over its
useful life. There are several types of depreciation methods used in accounting, each with its
own advantages and disadvantages. Here are the most common depreciation types:

By Mohamed Samir Rashed

 STRAIGHT-LINE
DEPRECIATION
This is the most common and simplest method of
depreciation. It involves dividing the cost of the
asset by its useful life and charging an equal
amount of depreciation expense each year. For
example, if an asset cost $10,000 and has a
useful life of 5 years, the annual depreciation
expense would be $2,000 ($10,000/5).

By Mohamed Samir Rashed

 DOUBLE-DECLINING
BALANCE
DEPRECIATION
This method involves charging a higher rate of
depreciation in the early years of an asset's life,
and then gradually decreasing the rate over time.
This method assumes that an asset will lose more
of its value in the early years and less in later
years.

By Mohamed Samir Rashed

 SUM-OF-YEARS-
DIGITS
DEPRECIATION
This method is similar to the double-declining
balance method, but it spreads the depreciation
over the asset's useful life using a fraction that
decreases each year. The numerator of the
fraction is the number of years remaining in the
asset's useful life, and the denominator is the sum
of the digits of the useful life. For example, if an
asset has a useful life of 5 years, the denominator
would be 15 (1+2+3+4+5).

By Mohamed Samir Rashed

 UNITS OF
PRODUCTION
DEPRECIATION
This method is based on the actual usage of the
asset rather than its useful life. It involves
dividing the total cost of the asset by the number
of units it is expected to produce over its lifetime,
and then charging depreciation based on the
number of units produced each year.

By Mohamed Samir Rashed

 MACRS
DEPRECIATION
This is a method of depreciation that is used for
tax purposes in the United States. It stands for
Modified Accelerated Cost Recovery System, and
it involves dividing the cost of an asset into
several classes based on their useful lives, and
then using a set of depreciation rates to calculate
the annual depreciation expense.

By Mohamed Samir Rashed

About Me

MOHAMED
SAMIR RASHED
CHIEF ACCOUNTANT

CMA HOLDER , IFRS DIPLOMA HOLDER , LINKEDIN INFLUENCER

FOLLOW ME FOR MORE FINANCIAL KNOWLEDGE

mohammedsamir947@gmail.com
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