Methods of Depreciation
Different methods of calculating provision for depreciation are mainly Accounting customs which may be used by different concerns taking into consideration thier individual peculiarities. The following are the main methods of providing Depreciation: Fixed instalment ( or fixed percentage on original cost or straight line) method: Under this method a fixed percentage of the original value of the asset is written off every year so as to reduce the asset account to nil or to its scrap value at the end of the estimated life of the asset. To ascertain the annual charge under this method all that is necessary is to divide the original value of the asset ( minus it's residual value, if any ) by the number of years of its estimated life i.e., The amount of depreciation charged during each period of the assets like is constant. If the charge of depreciation is plotted annually on a graph paper and the points joined together, then the gap will reveal a straight line, that is wh