Question

Describe two basic methods of charging depreciation.

Answer 1

Two basic methods of charging depreciation are:

1. Straight line method: This method calculates a fixed amount of depreciation every year, considering the useful life of assets and their salvage value at the end of their useful life.
   • Straight Line Depreciation = `"Total Depreciable Amount"/"Expected Useful Life"`
   • Rate of Depreciation = `"Straight Line Depreciation"/"Total Depreciable Amount" xx 100`
2. Written-down value method: This method uses the asset's current book value to compute the depreciation amount for the next period. It is also known as the declining balance method.