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Straight Line Method of Depreciation Video Lecture - Commerce
FAQs on Straight Line Method of Depreciation Video Lecture - Commerce
| 1. What is the straight line method of depreciation? |  |
Ans. The straight line method of depreciation is a commonly used accounting technique to allocate the cost of an asset evenly over its useful life. It assumes that the asset depreciates at a constant rate each year.
| 2. How is the depreciation expense calculated using the straight line method? | |
Ans. To calculate the depreciation expense using the straight line method, you need to determine the cost of the asset, its estimated salvage value, and its expected useful life. Subtracting the salvage value from the cost and dividing it by the useful life will give you the annual depreciation expense.
| 3. Can the straight line method of depreciation be used for any type of asset? | |
Ans. Yes, the straight line method of depreciation can be used for any type of asset as long as it has a determinable useful life. This method is commonly used for buildings, machinery, vehicles, and other tangible assets.
| 4. What are the advantages of using the straight line method of depreciation? | |
Ans. One advantage of using the straight line method is its simplicity. It is easy to understand and calculate, making it widely accepted and used. Additionally, it provides a consistent depreciation expense over the asset's useful life, which aids in financial planning and budgeting.
| 5. Are there any limitations or drawbacks to using the straight line method of depreciation? | |
Ans. While the straight line method is straightforward, it does not consider the asset's actual usage or its declining value over time. This can result in inaccurate depreciation expenses, especially for assets that experience rapid obsolescence or significant fluctuations in usage. Additionally, it does not account for the time value of money, as it assumes an equal depreciation expense each year.
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Nov 24, 2024 Last updated |
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