Rs 180,000. Double declining balance method is an accelerated approach by which the beginning booking value of each period is multiplied by a constant rate of 200% of the straight line depreciation rate. (17-2)/5 = 3. It is also known as fixed instalment method. The Excel equivalent function for Straight-Line Method is SLN(cost,salvage,life) will calculate the depreciation expense for any period. It is suitable for assets that operate uniformly and consistently over the life of the item. The straight-line method assumes that an asset … This method assumes that the depreciation is a function of the passage of time rather than the actual productive use of the asset. User-defined Depreciation. The straight-line method of depreciation assumes a constant rate of depreciation. Under this method, yearly depreciation is calculated by dividing an asset’s depreciable cost by its estimated useful life. (4) The asset’s value is reduced to zero or scrap value at the end of its useful life. Graph below shows accumulated depreciation under straight line method from purchase of asset till end of its useful life, here we can see that after completing its useful life asset’s accumulated depreciation becomes equal to its depreciable amount i.e. Under this method, an equal amount is charged for depreciation of every fixed asset in each of the accounting periods. Depending on the frequency of depreciation calculation, the carrying amount of the asset declines in equal steps. For a 10-year asset, the depreciation rate would be one-tenth, or 10 percent, of the 100 percent depreciation rate. Differences in Diminishing or Reducing balance method: Meaning; Under this method, a constant rate applies over the assets declining book value (Cost minus Accumulated Depreciation). You can calculate straight-line depreciation by subtracting the asset’s salvage value from the original purchase price and then dividing it by the total number of years it is expected to be useful for the company. 4. Did you know that the assets you own, lose their value while they are being used? Straight Line Method: – In Straight Line Method, we calculate the fixed amount of depreciation on the original cost of an asset and charge until the book value of an asset will equal to zero or its scrap value. Definition: The straight-line depreciation method is one of the most popular depreciation methods that use to charged depreciation expenses from fixed assets equally period assets’ useful life.. Straight-line depreciation method. That there are other methods of calculating depreciation in addition to the straight line and reducing balance methods. The primary method for steady depreciation is the straight-line method. He uses the straight-line method of depreciation (\$13,000 cost – \$2,000 salvage value / 5 year useful life) and calculates a depreciation of \$2,200 each year. 6. Straight-line amount = 23,730.46/3 = 7,910.15 = 3,995.07 + 3,995.08. We all have seen a straight line which goes straight from one point to another without any hiccups, in the same way in case of accountancy straight line method of depreciation is used in which the company charges depreciation expense at a fixed rate over the estimated useful life of an asset. Certain land improvements can be depreciated over 15 years at a 150% declining balance, with certain personal property depreciated over 7 or 5 years at a 200% declining balance. 5. Variable declining method which is a mix between the declining balance amortization and the straight line depreciation approaches. For example, an asset acquired on the first day of April would be used for only nine months during the first calendar year. 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