How To Calculate Depreciation
Depreciation on Depreciable Assets is calculated by applying different Depreciation Methods. These Methods are used to compute depreciation according to Generally Accepted Accounting Principles (GAAP) . Some important and famous depreciation methods are studied below one by one: 1. Straight Line Depreciation Method Under this method, the depreciation is calculated by applying a fixed rate, let's say 10%, on the depreciable cost. In this method, the Depreciable Cost is equal to the cost of the assets - residual value / Salvage Value (the amount of assets left after fully charging depreciation expense within the useful life). For Example, the rate of depreciation on furniture is 10% and the cost of the Furniture is Rs. 53000 then residual value is Rs 3000 that is left after charging Straight Line Depreciation Expense (50000/10 = 5000) for the useful life of Furniture (10 Years). Equal amount of Depreciation Expense is charged within the 10 years life of Fur