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Distinction between Straight Lin…

Distinction between Straight Line and Diminishing

Balance Method?
Answer in financial accounting (https://www.owlgen.com/qa-tag/financial-accounting )
Course: B.Com (https://www.owlgen.com/question- Share 
category/bcom)

Straight Line Method :

Amount of Depreciation: Equal amount of depreciation is charged

every Year

Calculation of depreciation: Depreciation is calculated at a fixed

percentage on the original cost of the asset.

Book value: The book value of the as-set become zero or equal to

its scrap value.
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Suitability: This method is suitable for those assets in relation to
which
Topics (a) repair charges are less (b) the’ possibilities of
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obsolescence is less.

Calculation Easy or difficult: It is easy to calculate the rate of

depreciation.

Tax Purposes: This method is not applicable for income tax

purposes.

Diminishing Balance Method :

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11/22/2018 Distinction between Straight Line and Diminishing Balance Method? - Owlgen.com

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Amount of Depreciation: The amount of depreciation goes on

reducing year after year.

Calculation of depreciation: Depreciation is calculated on the

reducing Balance of asset.

Book value: The book value of the asset does not became zero.

Suitability:  The method is suitable for those assets in relation to

which (a) the amount of re-repairs and renewals goes on
increasing-ing as the assets grow older and (4) the possibilities of
obsolescence are more.

Calculation Easy or difficult: It is difficult to calculate the rate of

depreciation.

Tax Purposes: This method is applicable for income tax purposes.

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