The depreciation schedule 043-03070030

Methods of depreciation

There are 2 methods of depreciation:

• prime cost depreciation method (also known as straight line)
• diminishing value depreciation method (also known as reducing balance)

Under the prime cost method, each year the amount claimed as an expense is based on the cost of the asset whereas under the diminishing value method, the amount claimed is based on the written down value (WDV) of the asset. The WDV is the cost of the asset less all previous depreciation amounts. Businesses can choose either method of depreciation, but because of the ability to claim greater expense, and therefore a larger tax deduction, in the earlier years, most choose the diminishing value method.

Examples

For an explanation of some of the terms shown in the example, see the Process page.

Example Depreciation Schedule

Example SBE general pool worksheet