A method of calculating the depreciation on a fixed asset designed to produce a constant annual charge that includes both depreciation and the cost of capital.
The depreciable amount is the value of a fixed asset used as the basis for calculating the depreciation charge for a specific period.
Depreciation is a measure of the decrease in value of tangible fixed assets during a given accounting period, reflecting wear and tear, obsolescence, or reduction in useful economic life. It can be relevant for both accounting and currency valuation contexts.
The percentage rate used in various methods of depreciation to determine the amount of depreciation that should be written off a fixed asset and charged against income or the profit and loss account.
The diminishing-balance method, also known as the reducing-balance method, is a way of calculating depreciation of fixed assets whereby the annual depreciation charge is a fixed percentage of the depreciated value at the beginning of each period.
The reducing-balance method is a form of depreciation calculation that allocates a higher depreciation expense in the earlier years of an asset’s life and a lower expense in the later years.
Residual value, also referred to as disposal value or net residual value, represents the expected proceeds from the sale of an asset, net of the costs of sale, at the end of its estimated useful life.
