The difference between straight line method and diminishing balance method: Straight line method is easier to operate and calcuate whereas diminishing does not.

What is the difference between straight line and diminishing balance methods?

In accountancy, depreciation refers to two aspects of the same concept: the decrease in value of assets (fair value depreciation), and the allocation of the cost of assets to periods in which the assets are used (depreciation with the matching principle).

Depreciation

Accounting -> Depreciation Depreciation Two methods of depreciation are: Straight line method Diminishing balance method The methods differ in valuation and in the impact valuation has on the profit reported and subsequent effect on the balance sheet. The results of the application of the different methods apply in the following ways: Disposal value the straight line method deducts the disposal value of the asset prior to calculation, whereas the diminishing balance method does not Matching costs with revenue the straight line method assumes a consistent return to revenue over the life of the assets diminishing balance assumes the asset earns greater revenue in the earlier years of the asset's life Obsolescence only the diminishing balance method allows for possible obsolescence by attempting to write off the bulk of the asset cost as depreciation in the earlier years of the asset's life Calculation of depreciation the straight line method is most simple to calculate, providing the same amount each year diminishing balance is based on the written down value of the asset and requires deduction of previous accumulated depreciation prior to calculation of depreciation for this accounting period Merits/disadvantages Straight line method simple to operate/calculate does not allow for obsolescence or the premature end of the economic life of the asset helps long term planning as you know what is going to be the amount allocated in future periods to depreciation Diminishing balance method allows for obsolescence enables the recovery of cost of the asset at the earliest opportunity tendency to overstate depreciation (and therefore understate profit) in the early years of the asset life

Two types of methods are found out to calculate depreciation: Straight line method and diminishing method. Information regarding depreciation is clearly given. No confusion at all.

Straight line method is simple to calculate. It help the lay man to understand much better.

I agree with the straight line method, it says stability., with the diminishing line, means you don't know from day to day, month to month what to expect.

What does depreciation have to do with accounting issues?

The methods differ in valuation and in the impact valuation has on the profit reported and subsequent effect on the balance sheet.