types of depreciation method?
Answers
There are several types of depreciation expense. ...
Depreciation expense is used in accounting to allocate the cost of a tangible asset. ...
Straight-line depreciation. ...
Compared to other depreciation methods, double-declining-balance depreciation.
Depreciation Methods
The four main types
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What Are the Main Types of Depreciation Methods?
There are several types of depreciation expense and different formulas for determining the book value of an asset. The most common depreciation methods include:
•Straight-line
•Double declining balance
•Units of production
•Sum of years digits
#1 Straight-Line Depreciation
Method:
Straight-line depreciation is a very common and simple method of calculating the expense. In straight-line depreciation, the expense amount is the same every year over the useful life of the asset.
#2 Double Declining Balance Depreciation Method:
Compared to other depreciation methods, double-declining-balance depreciation results in larger expense in the earlier years as opposed to the later years of an asset’s useful life. The method reflects the fact that assets are more productive in its early years than in its later years. With the double-declining-balance method, the depreciation factor is 2x that of a straight line expense method.
#3 Units of Production Depreciation Method:
Units-of-production depreciation method depreciates assets based on the total number of hours used or the total number of units to be produced over its useful life.
#4 Sum-of-the-Years-Digits Depreciation Method:
Sum-of-the-years-digits method is one of the accelerated depreciation methods. A higher expense is incurred in the early years while lower expense is incurred in the latter years of the asset.
In sum-of-the-years digits depreciation method, the remaining life of an asset is divided by the sum of the years and then multiplied by the depreciating base to determine the expense.
Hope this will help you ^_^