Question

Which method is approved by income tax authorities for charging depreciation?​

Answer 1

Answer:

The straight-line method is the simplest and most commonly used way to calculate depreciation under generally accepted accounting principles

Answer 2

When you buy a tangible asset, its value decreases over time. Some decrease more quickly than others. This is something you'll probably come to realize when you try to re-sell the item—in most cases, you won't get the same price you originally paid. This is called depreciation. If you run a business, you can claim the value of depreciation of an asset as a tax deduction. In this article, we outline the basics of depreciation and the best way to calculate this value for tax purposes.

KEY TAKEAWAYS

Depreciation refers to how much of an asset's value is left over the course of time.

Businesses can recover the cost of an eligible asset by writing off the expense over the course of its useful life.

The straight-line method is the simplest and most commonly used way to calculate depreciation under generally accepted accounting principles.

Subtract the salvage value from the asset's purchase price, then divide that figure by the projected useful life of the asset.

What Is Depreciation?

Depreciation refers to how much of an asset's value is left over the course of time. This value is the result of the asset being used or because it becomes obsolete. These include—but may not be limited to—vehicles, plants, equipment, machinery, and property. So if you purchase a vehicle, it immediately depreciates or loses value once it leaves the lot. It loses a certain percentage of that remaining value over time because of how it's driven, its condition, and other factors.