What are the methods of calculating depreciation?

There are 2 ways in calculating depreciation: Straight Line method and Reducing Balance method. Straight Line method is simple to calculate ( (cost of the asset - Residual value) / Useful life ). When calculated, the value will be constant each year, however that is not the case for Reducing Balance method. Reducing Balance method takes in to account that the value of the asset will depreciate most in the first few years of its useful life, but will start to diminish. This can be calculated by using this formula ( (Netbook value - Residual Value) * Depreciation Factor ). Since both methods differ to one another in terms of what is derived, which one to choose depends on the question being asked, meaning that you will need to know both methods for the exam

Answered by Faizan A. Accounting tutor

1573 Views

See similar Accounting GCSE tutors

Related Accounting GCSE answers

All answers ▸

Who may be interested in viewing a company's balance sheet/ financial statement?


What Is straight line depreciation?


what is the difference between management and financial accoounting?


List three ways in which the accounting equation can be written.


We're here to help

contact us iconContact usWhatsapp logoMessage us on Whatsapptelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2025

Terms & Conditions|Privacy Policy
Cookie Preferences