In this week we are discussing the different types of depreciation methods; straight line and double declining balance. Let's put some numbers to the scenario of switching from straight line to double declining; Company ABC has a new asset for $100,000, salvage value of $0 and a useful life of 10 years, assume the purchase date was January 1st so a full year of depreciation would be taken at December 31st. Knowing this information what would the straight line amount of depreciation calculate to and what would the double declining method amount to for the first 5 years?
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
In this week we are discussing the different types of
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