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Method of providing deprecation

There are several methods of Depreciation i.e. for computing the expense to be allocated to each period. In deciding on the best depreciation methods, the choice would depend upon the pattern of expected benefits obtainable in each period from its use.

Straight Line Methods


This is the most popular method because of its simplicity and consistency. Under this method a fixed and equal amount in the form of depreciation is written off during each accounting period. Over the expectal useful life of the assets. The amount and rate of depreciation is calculated as Under:


Cost of Assets – Residual Value

Annual Depreciation  =              Estimated Life

Amount of Depreciation

Rate of Depreciation =    ×       100nOriginal Cost


1. It is simple to calculate and easy to understand.

2. It can reduce the book value of the assets to zero.

3. The valuation of the assets each year in the Balance Sheet is reasonably fair.


1. This method ignores the fact that the service yielding ability of the assets fall while the repairs and maintenance costs increase with the passage of time.

2. If an additional assets is acquired, the amount to be charged as depreciation needs to be recalculated.

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