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What is ASSET depreciation and how many types of asset depreciation are there?

Answer:

Depreciation is a non cash item, it is an estimated value at which the assets are devaluing over time.
There are two main types:
Straight line
Reducing balance

Straight line is where is depreciated the same each year and is worked out by taking the cost minus the expected resale value when you expect to sell it and divide that by the number of years the company intends to keep it for. Normally a company will just assume a percentage of around 15 to 25%.

Reducing balance works by applying a percentage to the net book value. So in year 1 an assets costing £10,000 at a rate of 20% will have depreciation of £2,000 leaving a net book value of £8,000. Year 2 would be 20% of £8,000 being £1,600 leaving a NBV of £6,400. Year 3 would be 20% if £6,400 being £1,280 leaving a NBV of £5,120. So you can see that tge depreciation each year is reducing.

First answer by Andrew Bushell. Last edit by Andrew Bushell. Contributor trust: 7 [recommend contributor ]. Question popularity: 9 [recommend question].

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