Depreciation methods

Depreciation methods are ways to spread out the cost of an asset over its useful life. The most common methods are straight-line, which evenly allocates cost each year, and declining balance, which expenses more in the early years and less later on. There's also units of production, based on usage. These methods help businesses reflect the asset’s decreasing value over time in their financial statements, providing a clearer picture of profit and asset worth. Choosing the right method depends on how the asset is used and how its value diminishes over time.