ECONOMICS

Detailed explanation-1: -Diminishing Balance Method The amount of depreciation in the straight-line method remains the same every year. The amount of depreciation in the diminishing balance method decreases every year. The book value in the Straight-line method becomes zero.

Detailed explanation-2: -The reducing-balance method, also known as the declining-balance method, in the initial years of an asset’s “service.” As with the straight-line method, you apply the same depreciation rate each year to what’s called the “adjusted basis” of your property.

Detailed explanation-3: -Straight Line Method: According to this method, each accounting period’s depreciation charge is identical for each fixed asset. Until the asset is reduced to zero or its salvage value at the end of its expected useful life, this constant amount is charged.

Detailed explanation-4: -Increase Salvage Value Since assets are not depreciated below their salvage value–the amount management believes it can sell the asset for at the end of its useful life–an increase in the asset’s salvage value will reduce the amount that can be depreciated on the asset.