The Depreciation Methods presentation aims to provide a comprehensive understanding of various techniques used to calculate the decrease in asset value over time. By exploring different approaches to depreciation, this presentation assists in making informed decisions about long-term investment planning and maximizing asset utilization. Definition of depreciation: Exploring the concept of depreciation as the systematic allocation of asset cost over its useful life. Highlighting how depreciation facilitates accurate financial reporting, tax deductions, and asset replacement planning. The Depreciation Methods presentation provides a comprehensive overview of the straight-line, declining balance, and sum-of-the-years' digits methods, equipping individuals with the knowledge necessary to leverage depreciation techniques effectively. By understanding these methods, organizations can make informed decisions to optimize asset utilization, financial reporting accuracy, and long-term investment planning. Comparison of all three methods: Presenting a side-by-side comparison of the straight-line, declining balance, and sum-of-the-years' digits methods, highlighting their distinctive features. Real-life applications: Showcasing real-world scenarios where each method's specific advantages make them more suitable, helping organizations make the best choice according to their asset portfolios and financial goals.

1. DEPRECIATION
METHODS
By
MAHA ASIM
BBA-1

2. Definition:
Depreciation is the reduction in an asset's value
caused by the passage of time due to use or
abuse, wear and tear.

3. • Total Cost for
the Asset
• Estimated
Economic Life
• Estimated
Residual Value

4. • Straight-Line
Method
• Reducing
Balance
• Units of
Production

5. Definition:-
This method spreads the cost of the fixed
asset or the depreciation expense evenly
over its useful life.
Equation:-
Cost of the Asset- Residual Value(Salvage
value)
Estimated Economic Life(useful life)

6. Purchased Equipment Asset…… Rs.150,000
Useful Life…… 10 years
Residual Value/Salvage Value……. Rs. 7500
Straight-Line = (150,000-7500)
10
= 14250

7. Definition:-
An accelerated method of depreciation, it results in higher depreciation
expense in the earlier years of its useful life.
Steps to Calculate:-
Step 1: Calculate the depreciation charge by using the following
formula:
Depreciation charge per year = (book value – residual value) x
depreciation factor
Step 2: Subtract the depreciation charge from the current book value to
calculate the remaining book value.

8. A company purchases a van for Rs. 500,000 The company
estimates that the van will lose 30% of its value each year, with
a scrap value of Rs.100,000. The first 3 years of calculations
would look like this:
Years Calculation 1 Depreciation
Charges
Calculation 2 Book value
0 - - - 500000
1 (500000-100000)x30% 120000 500,000-120000 380000
2 (380000-100000)x30% 84000 380000-84000 296000
3 (296000-100000)x30% 58800 296000-58800 237200
Residual Value :
237200

9. Definition:-
A depreciation procedure used for property that is not in
continuous use. The unit of production method is useful
when the property's value is more closely related to the
number of units it produces than the number of years it is
in use.
Equation:-
Cost of the Asset- Residual Value/Salvage Value
Activity Consumption

10. • Rs. 500000 Purchased a car
• 10 years lifespan
• Rs. 80000 Salvage/Residual Value
• Max Miles: 120000 (Activity)
• 2016 Miles Driven: 15000
Units of production = (500000-80000)
120000
= Rs. 3.5/mile
For 2016:
Depreciation = 15000 miles x Rs. 3.5/mile
= Rs. 52500