why depreciation is not same amount each year?
the original value of the fixed assets decrease year on year ,hence the depreciation is calculated accordingly.
c-decrease rapidly and then slowly
swagger
In sum of year digit depreciation method depreciation is charged based on total number of years fixed assets is usable in business instead of using any percentage or fixed amount of depreciation.
Depreciation is for a particular year (say for Year 3). Accumulated depreciation is the aggregate of depreciation from the beginning (say from Year 1 to Year 3)
the original value of the fixed assets decrease year on year ,hence the depreciation is calculated accordingly.
$15,10025,000 - 1,900 = 23,100 [total depreciation after 7 years]23,100 / 7 years = 3,300 per year [amount of depreciation each year]3,300 per year * 3 years = 9,900 [amount of depreciation after three years]25,000 - 9,900 = 15,100 [value after three years of depreciation]
c-decrease rapidly and then slowly
swagger
Diminishing value method where you depreciate the asset by a percentage rather than the straight line method where the same amount gets depreciated each year.
Under straight line depreciation, fixed amount of depreciation is charged to every year while in declining balance method depreciation percentage remains same but depreciation is charged on remaining balance of asset due to which the amount of depreciation is different in every year.
Depreciation for 1st year = 6000 Depreciation for 2nd year = 2000 Depreciation for 3rd year = 400
In sum of year digit depreciation method depreciation is charged based on total number of years fixed assets is usable in business instead of using any percentage or fixed amount of depreciation.
An advantage of depreciation is being able to have a tax deduction. A disadvantage is not being able to calculate the rate of depreciation for each year.
Sinking fund method for depreciation The straight line method has equal annual depreciation for every year. There are other methods which has more depreciation allocated to the earlier years like Written-Down Value (WDV) method in which depreciation is charged at fixed rate (%) on the reducing balance (i.e. cost less depreciation) every year. The sinking fund method allocates more depreciation to the later years. The depreciation for the first year equals the annual deposit needed for a sinking fund to accumulate at the given rate to an amount that equals the depreciation base. For each consecutive year, the annual depreciation equals the annual sinking fund deposit plus the interest earned on the fund up to that year.
Depreciation
Depreciation is for a particular year (say for Year 3). Accumulated depreciation is the aggregate of depreciation from the beginning (say from Year 1 to Year 3)