(2)DepreciationMethodsMethodsUnits ofActivitymethodStraight-lineReducing-SumoftheyearmethodBalancemethoddigitsmethod112025/12/3
11 2025/12/3 (2)Depreciation Methods Methods Straight-line method ReducingBalance method Units of Activity method Sum of the year digits method
1)Straight-linemethodItassumesthatdepreciationhappensevenlythroughout the service/useful lifeoftheasset.Sounderthismethod,equal amountof depreciation inexpensed eachyear duringtheasset's useful life.Acquisitio n cost - Residual valueDepreciati on =Yearsof service lifeDepreciati on = (Acquisitio n cost - Residual value) × Depreciati on rate122025/12/3
12 2025/12/3 1)Straight-line method ⚫ It assumes that depreciation happens evenly throughout the service/useful life of the asset. So under this method, equal amount of depreciation in expensed each year during the asset’s useful life. Years of service life Acquisitio n cost Residual value Depreciati on − = Depreciati on = (Acquisitio n cost −Residual value) Depreciati on rate