Get to Know Advantages and Disadvantages of Straight Line Method of Depreciation
Depreciation can help in calculating the actual value of fixed assets at the end of each accounting year. Like any other accounting system it has different categories. But none of them include any cash transaction. The asset is already bought and then it is used for earning money with a cost of its useful lifetime. Among many such methods, one of the oldest one is known as Straight line method. You can get to know it from Advantages and Disadvantages of Straight Line Method Assignment Help. Visit us at our official website 24x7assignmenthelp.com.
How does straight line method perform?
We have already mentioned about this to be one of a depreciation method. But the question is how does it perform? From Advantages and Disadvantages of Straight Line Method Assignment Help you will notice that it is calculated depending on its value and useful lifetime. Since depreciation won’t ask for a direct decline of total value right after the purchase, you have to calculate them depending on their useful lifetime of serving.
In straight line, depreciation amount is equal at the end of each year. In this method, it is believed that in each year any asset using for earning profit will lose its usefulness equally. So when it will put to a graph, you can find a straight line. An accounting system will require same depreciation rate each year for declining value from that asset slowly.
Advantages of straight line method:
From a complete Advantages and Disadvantages of Straight Line Method Homework Help you can find out important points on its advantages:
- This method is known to be very simple in nature.
- The level of complications in its calculating process is very low.
- At its end of cycle, that tangible asset will lose its value ultimately turning zero.
- You will find a real match made into both the cost of that asset and revenue earned from it.
- Each year same amount of depreciation value will be adjusted from profit and loss account.
- This method is best known for calculating depreciation on furniture, fittings, trade mark and also patents. When calculating these small intrinsic values, depreciation will be cut off from their estimated lifetime.
Disadvantages of straight line method:
In this next stage of Advantages and Disadvantages of Straight Line Method Homework Help we will discuss disadvantages of this method:
- If there is any further addition made onto that asset it becomes difficult to calculate.
- Maintenance become costly when these assets become older but depreciation value remains same.
- This method remains silent on capital invested on those fixed assets.
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