Which feature is normally associated with the reducing-balance method of depreciation?
Correct answer: B. Higher depreciation charges in the earlier years
- A. Equal depreciation charges throughout the asset's life
- B. Higher depreciation charges in the earlier years
- C. Depreciation based only on units produced
- D. Depreciation beginning after the asset is fully paid
Explanation
The reducing-balance method applies a fixed percentage to the asset's declining carrying amount. Consequently, depreciation is generally higher in earlier years and decreases over time.
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About Depreciation and Non-Current Assets
Non-current assets are long-term resources recorded at cost and reduced by accumulated depreciation to show their carrying amount. Coverage includes straight-line and reducing-balance methods, residual value, useful life, depreciation adjustments, capital and revenue expenditure, and the profit or loss arising when an asset is disposed of.
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