Depreciation Methods

There are several methods that can be used to calculate depreciation expense on an asset:

1. Straight-line method: Under this method, the depreciation expense is calculated by dividing the cost of the asset by its estimated useful life. The same amount of depreciation is recognized each year over the asset's useful life.
2. Units of production method: This method calculates the depreciation expense based on the number of units produced by the asset. The depreciation rate is calculated by dividing the cost of the asset by its estimated useful life, measured in units of production.
3. Double-declining balance method: Under this method, the depreciation expense is calculated by applying a fixed rate, typically double the straight-line rate, to the declining book value of the asset. The book value is the asset's original cost minus accumulated depreciation. This method results in higher depreciation expense in the early years of the asset's useful life and lower expense in later years.

Which method is used to calculate depreciation expense depends on the nature of the asset and the goals of the company. It is important to choose a method that accurately reflects the asset's useful life and the way it is being used

Explanation of each method