How to work out reducing balance depreciation
Reducing balance charges a percentage of what is left, so the charge falls each year. Work through a van's first three years.
Task 1A percentage of what is left3 questions
The reducing balance method charges a fixed percentage of the carrying amount at the start of each year. As the carrying amount falls, so does the charge.
Residual value is not taken off first. The percentage is chosen so that the asset is written down to about its residual value by the end of its life.
| Year | Carrying amount at start | Charge for the year | Carrying amount at end |
|---|---|---|---|
| 1 | 24,000.00 | 6,000.00 | 18,000.00 |
| 2 | 18,000.00 | To work out | To work out |
Task 2How it compares with straight line4 questions