Sum of Years Digits Method

Sum-of-years' digits is a depreciation method that ends up in a more accelerated write-off than straight line, but less accelerated than that of the double-declining balance methodology. under this methodology, annual depreciation is determined by multiplying the depreciable cost by a series of fractions based on the total of the asset's useful life digits. The total of the digits is determined by using the formula (n2+n)/2, where n is equal to the useful lifetime of the asset.

Units of Production

The units-of-production depreciation method assigns an equal amount of expense to every unit produced or service rendered by the asset. This method is typically applied to assets employed in the production line. The formula to calculate depreciation expense involves 2 steps: (1) determine depreciation per unit ((asset's historical value - estimated salvage value) / calculable total units of production during the asset's useful life); (2) verify the expense for the accounting amount (depreciation per unit X number of units created in the period).

Declining Balance Method / Reducing Balance Method / Fix Rate Method

The method under which asset is depreciated at fixed percentage until the value of the asset bring down to its residual value.

Depreciation Expense = Book Value x Accelerated Depreciation Rate

Don’t deduct salvage value when figuring the depreciable base for the declining balance method. but do limit depreciation so that, at the tip of the day, the asset’s net book value is the same as its calculable salvage value. 

Double Declining Balance Method

The double-declining balance methodology could be a variety of accelerated depreciation methodology that calculates a better charge within the initial year of associate degree asset's life and bit by bit decreases depreciation expense in ulterior years.

To calculate depreciation expense, use double the straight-line rate. as an example, suppose a business has associate degree plus with a value of one,000, a hundred salvage price, and five years helpful life. First, calculate the straight-line rate. Since the plus has five years helpful life, the straight-line rate equals (100% / 5) or 2 hundredth p.a.. With double-declining-balance, double that rate to make four-hundredth. Apply the speed to the book value of the plus (cost deducted by accumulated depreciation) and ignore salvage value. At the purpose wherever book value is up to the salvage value, no additional depreciation is taken.

Straight Line Method / Original Cost Method / Fixed Installment Method

Straight-line depreciation is that the simplest and most frequently used methodology. during this method, the corporate estimates the salvage value(scrap value) of the asset at the end of the amount throughout that it'll be used to generate revenues (useful life). (The salvage value is associate estimate of the value of the asset at the time it'll be oversubscribed or disposed of; it should be zero or maybe negative. Salvage worth is additionally called scrap worth or residual value.) the corporate can then charge constant quantity to depreciation annually over that amount, till the value shown for the asset has reduced from the first value to the salvage value.

Depreciation

The process of allocating the cost of fixed assets to profit and loss a/c over its useful life is called depreciation.

 1. a technique of allocating the price of a tangible quality over its helpful life. Businesses depreciate long term assets for each tax and accounting functions.

2. A decrease in AN asset's price caused by unfavorable market conditions.

Fixed Assets

Assets which are purchased for permanent use in business are called fixed assets. For example: Building, Plant, Machinery, Equipment, Tools, Motor vehicle, Furniture.

Fixed assets, additionally referred to as a non-current assets or as property, plant, and instrument, could be a term utilized in accounting for assets and property that can't simply be convert into money. this will be compared with current assets like money or bank accounts, which Fixed assets, additionally referred to as a non-current quality or as property, plant, and instrument, could be a term utilized in accounting for assets and property that can't simply be regenerate into money. this will be compared with current assets like money or bank accounts, that are delineated  as assets. In most cases, solely tangible assets are remarked as fixed. International Accounting Standards (IAS) sixteen, defines fix Assets as assets whose future economic profit is probable to flow into the entity, whose value is measured dependably.