Under which method of depreciation does the expense decrease over time?
Practice Questions
Q1
Under which method of depreciation does the expense decrease over time?
Straight-line method
Declining balance method
Units of production method
Sum-of-the-years'-digits method
Questions & Step-by-Step Solutions
Under which method of depreciation does the expense decrease over time?
Step 1: Understand what depreciation means. It is the process of allocating the cost of a tangible asset over its useful life.
Step 2: Learn about different methods of depreciation. There are several methods, including straight-line and declining balance.
Step 3: Focus on the declining balance method. This method calculates depreciation based on a fixed percentage of the asset's remaining book value each year.
Step 4: Notice how the expense changes. In the first year, the depreciation expense is high because it is based on the full value of the asset.
Step 5: Realize that as the asset ages, its book value decreases, leading to lower depreciation expenses in subsequent years.
Step 6: Conclude that the declining balance method is the one where the expense decreases over time.
