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Types of Depreciation

Accelerated
Accelerated

Accelerated depreciation is any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years of the life of an asset.

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Considerations
Considerations

Change in Useful life or Salvage Value All depreciation methods estimate both the useful life of an asset and its salvage value. As time passes the useful life of a company's equipment may be cut short (due to new technology, for example), and its salvage value may also be affected.

Declining Balance
Declining Balance

A declining balance method is a common depreciation-calculation system that involves applying the depreciation rate against the non-depreciated balance. Instead of spreading the cost of the asset evenly over its life, this system expenses the asset at a constant rate, which results in declining depreciation charges each successive period.

Double Declining Balance
Double Declining Balance

The double declining balance depreciation method is an accelerated depreciation method that multiplies an asset's value by a depreciation rate. The double declining balance depreciation method is an accelerated depreciation method that multiplies an asset's value by a depreciation rate.

Straight-Line
Straight-Line

The straight line depreciation method is the most basic depreciation method used in an income statement. Learn how to calculate the formula. The straight line depreciation method is the most basic depreciation method used in an income statement.

Sum of Years Digits
Sum of Years Digits

The sum of the years' digits method will result in greater depreciation in the earlier years of an asset's useful life and less in the later years. However, the total amount of depreciation over an asset's useful life should be the same regardless of the depreciation method used.

Units of Production
Units of Production

In units of production method of depreciation, depreciation is charged according to the actual usage of the asset. In units of production method, higher depreciation is charged when their is higher activity and less is charged when there is low level of operation.

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