METHODS OF
DEPRICATION
 STRAIGHT LINE METHOD &
REDUCING BALANCE METHOD
        
                      Prof. Bharat Vira
Meaning :

   The monetary value of an asset decreases over

time due to use, wear and tear or obsolescence,
this decrease is measured as depreciation.
Methods of calculating depression 

■ Straight line method

■ Reducing balance method

Straight line method:

The straight line method of depreciation allocates

the same amount of cost each reporting period.

Formula:
Depreciation =  Cost – Scrap Value
                             Useful Life
 Reducing balance method:
   Method of asset depreciation based on a percentage
of its net book value which decreases every year.

Formula: 
 r = 1 - (S/C)1/n
Difference 
Reducing balance
Single line method method
■ Original cost is basis ■ Book value is the basis
■ Amount of depreciation ■ Amount of depreciation
is fixed varies
■ Income tax applicable ■ Income tax is not
■ Depreciation is applicable
calculated on original ■ Depreciation is
cost calculated on reducing
■ The value can be cost
written down to zero ■ The value cannot be
written down to zero