1.

Distinguish between straight line method and diminishing balance method of depreciation

Answer»
Straight line MethodDiminishing balance Method
1. A Fixed amount is deducted from the value of an asset.1. The amount of depreciation goes on reducing year after year.
2. Depreciation is computed on the original cost of the asset.2. Depreciation is calculated on the written down value of the asset.
3. The value of the asset is reduced to zero at the end of effective working life.3. The value of the asset will not become zero after its effective working life.
4. The method is also known as Fixed Instalment method or original cost method.4. This method is also known as reducing balance method or written down value method.


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