Question

define reducing balance method.​

Answer 1

Explanation:

• Here we will understand the difference between ‘fixed rate’ and ‘reducing balance rate’.

• Let’s take the above example but this time instead of interest rate being fixed, it will be reducing balance.

• Reducing balance depreciation is a method of calculating depreciation whereby an asset is expensed at a set percentage. In other words, more depreciation is charged at the beginning of an asset's lifetime and less is charged towards the end.

Answer 2

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Reducing Balance Method

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Under reducing balance method, the amount of depreciation is calculated by applying a fixed percentage on the book value of the asset each year. In this way, the amount of depreciation each year is less than the amount provided for in the previous year.