Accounts Notes: Types of Depreciation

Tuesday, 5 April 2011

Types of Depreciation

1. Fixed Instalment method or Stright line method
Dep. = Cost price – Scrap value/Estimated life of asset.
2. Diminishing Balance method: Under this metod, depreciation is calculated at a certain percentage each year on the balance of the asset, which is bought forward from the previous year.
3. Annuity method: Under this method amount spent on the purchase of an asset is regarded as an investment which is assumed to earn interest at a certain rate. Every year the asset a/c is debited with the amount of interest and credited with the amount of depreciation