Question

Differentiate fixed instalment method and diminishing balances method.​

Answer 1

Explanation:

• Following are the main differences between fixed installment method and reducing balance method of depreciation:

• Basis

Depreciation is charged on the original cost of assets in fixed installment method. In reducing balance method, depreciation is charged on the book value of asset.

• Yearly Depreciation

The amount of depreciation is the same in each year over the life of assets in fixed installment method. The amount of depreciation decreases every year in reducing balance method.

• Ending Value

In fixed installment method, book value of asset generally reaches to zero. Book value of asset does not reach to zero in reducing balance method.

• Acceptance

Fixed installment method of depreciation is not acceptable for tax purpose. Reducing balance method is acceptable for tax purpose.

Hope it helps..:)

#answerwithquality #BAL

Answer 2

The key distinctions between the fixed method and the diminishing balance technique of depreciation are as follows:

• Depreciation is calculated using the fixed technique, which is based on the asset's initial cost. Depreciation is imposed on the asset's book value in the diminishing balance approach.
• Depreciation is calculated as follows on a yearly basis: In a fixed scheme, the amount of depreciation is the same each year throughout the life of the assets. The diminishing balance strategy reduces the amount of depreciation each year.
• In the fixed technique, the asset's book value is usually zero. In the diminishing balance approach, the asset's book value does not reach zero.
• For tax purposes, the fixed method of depreciation is not accepted. For tax purposes, the reducing balance strategy is advantageous.