Health and sefteay Essay Example | Topics and Well Written Essays - 4500 words

Health and sefteay - Essay Example 2. Declining Balance Depreciation Method. This is an accelerated depreciation technique that calculates twice the value of the asset every year as an expense as compared to the straight-line method. The method is precise when the asset is expected to generate large revenues in its early life. The book value used in this method at the beginning of the depreciation year is the original cost of the asset while later in the year it is equivalent to the original cost less the accumulated depreciation. 3. Sum of the Years Digits (SYD) Method. This is also an accelerated technique for calculating the depreciation of an asset. It involves summing up the expected life of the asset for each consecutive depreciating year. For n years, the formula would be SYD = n (n + 1)/2. The depreciation is then calculated by multiplying the total depreciable amount of useful life of the asset by the remaining useful life divided by the SYD. The straight-line method is different from the other two techniques in that the amount of the deduction for depreciation is similar for each year of the life of the asset. This ensures that the method prevents bias in situations in which the depreciation pattern or the economic benefits of the asset are difficult to estimate. Hence it is most applicable where the useful life of the asset is long and when the economic benefits of the asset are difficult to estimate. The declining balance depreciation method is also referred to as double declining balance rate and it varies from the other methods in that it allows for larger amounts of depreciation during the early life of the asset as compared to later. It is most applicable when the asset is expected to generate a greater income during its early useful life. The Sum of the Years Digits (SYD) Method is different from the other two methods in that the numbers assigned to the consecutive useful years of the asset are summed up. For ‘n’ useful years, the sum of the