Depreciation is the reduction in the value of a fixed asset over time due to wear and tear, obsolescence, or any other reason. There are various methods of calculating depreciation, and each method has its own advantages and disadvantages. The straight-line method is one of the most commonly used methods of depreciation.

Explanation:

Under the straight-line method, the amount of depreciation expenses remains the same throughout the useful life of a fixed asset. This means that the asset is assumed to depreciate at a constant rate over its useful life. The calculation of depreciation under this method is as follows:

Depreciation expense = (Cost of asset – Salvage value) / Useful life

Where,

Cost of asset = the original cost of the asset
Salvage value = the estimated value of the asset at the end of its useful life
Useful life = the estimated time period for which the asset will be useful

For example, if the cost of an asset is $10,000, its salvage value is $1,000, and its useful life is 5 years, the annual depreciation expense would be:

Depreciation expense = ($10,000 – $1,000) / 5 = $1,800 per year

Advantages of the straight-line method:

1. Simple and easy to understand.
2. Provides a consistent and predictable amount of depreciation expense each year.
3. Suitable for assets that have a consistent rate of wear and tear over their useful life.

Disadvantages of the straight-line method:

1. Does not take into account the actual usage of the asset.
2. Assumes that the asset will have the same value at the end of its useful life.
3. May not be suitable for assets that have a higher rate of depreciation in the early years of their useful life.

Conclusion:

In conclusion, the straight-line method of depreciation is a simple and widely used method that provides a consistent and predictable amount of depreciation expense each year. It is suitable for assets that have a consistent rate of wear and tear over their useful life. However, it may not be suitable for assets that have a higher rate of depreciation in the early years of their useful life.

Under straight line method of depreciation the amount of depreciation expenses remains same in the entire useful life of fixed asset.. bcoz, under straight line method the depreciation is charged on the original cost of the asset..but not on diminishing value of the asset...