Reducing balance method
Accounting
ScanSolve AI Answer
Answer
The reducing balance method is an accelerated depreciation method where an asset's value is reduced by a fixed percentage each year. This means higher depreciation expenses are recognized in the early years of an asset's life and lower expenses in later years.
For example, if an asset costs $10,000 and has a depreciation rate of 20% per year:
- Year 1: Depreciation = $10,000 × 20% = $2,000. Book value = $10,000 - $2,000 = $8,000.
- Year 2: Depreciation = $8,000 × 20% = $1,600. Book value = $8,000 - $1,600 = $6,400.
Was this helpful?
Still stuck on this one?
Ask a follow-up, and the answer starts from this question.
Got a different question?Ask your own question
More Accounting Questions
Handwritten Step-by-Step Solution
Get this as a handwritten image on WhatsApp — like a tutor wrote it for you.
Try on WhatsApp