What_s_the_difference_between_depreciation_methods_

What's the difference between depreciation methods?

Declining balance depreciation method

The declining balance depreciation method applies the declining balance rate to the remaining book value (cost minus the accumulated depreciation). The system ignores the salvage value when the declining balance is calculated, but the asset will not be depreciated below the asset's salvage value. The depreciation amount is calculated by multiplying the straight-line amount by the declining balance rate. The first year's depreciation is adjusted for the portion of the year that the asset was in use.  

Straight-line depreciation method

The straight-line depreciation method uses a simple calculation to charge a constant amount to expense each period. The straight-line method divides the depreciable cost (cost less the asset's residual value) by the asset's estimated useful life. Depreciation is prorated between periods when an asset is in use for part of a year.

Straight-line half-year depreciation method

The straight-line half-year depreciation method uses the same calculation as straight-line depreciation except the depreciation for the first year and last year of the asset's life is half the depreciation expense for the full year.

Custom depreciation method

The custom depreciation method applies the amount entered for Annual Depreciation with the asset to each year of the asset's life. The first year's depreciation is adjusted for the portion of the year that the asset was in use.

Use None when the current asset value will not be depreciated.  


Which depreciation method do you want to use to depreciate the asset?

  • Declining balance. Use the options on the Depreciation tab to select Declining Balance as the Depreciation Method. Then, enter an amount in the Depreciation Rate field.

  • Straight-line. Use the options on the Depreciation tab to select Straight-line as the Depreciation Method.

  • Straight-line half-year. Use the options on the Depreciation tab to select Straight-line Half-year as the Depreciation Method.

  • Custom. Use the options on the Depreciation tab to select Custom as the Depreciation Method. Then, enter an amount in the Annual Depreciation field.

  • None. Use the options on the Depreciation tab to select None as the Depreciation Method.

 

 

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