Calculate asset depreciation
Annual Depreciation = (Cost - Salvage Value) ÷ Useful Life. A ₹1 lakh machine with ₹10,000 salvage over 10 years: (100,000-10,000) ÷ 10 = ₹9,000/year. Simplest and most common method.
Depreciation = Book Value × Depreciation Rate. It front-loads depreciation—higher charges in early years. Double declining uses 2 × straight-line rate. Matches assets that lose value quickly initially.
Straight-line: consistent-use assets. Declining balance: technology, vehicles that depreciate faster early. Units of production: assets based on usage. Method choice affects tax timing and financial statements.
Accumulated depreciation is total depreciation charged since asset purchase. It's a contra-asset account. Book Value = Original Cost - Accumulated Depreciation. Appears on balance sheet.
Depreciation is a non-cash expense that reduces taxable income. Accelerated depreciation provides tax benefits earlier. However, total deduction over asset life remains the same regardless of method.
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