Formula for Calculating Depreciation

1. When the Scrap Value is Given (To find the rate of depreciation) b:

[Tex]Rate~of~Depreciation=\frac{Cost~Price~of~Asset-Scrap~Value}{Estimated~Life~of~Assets}[/Tex]

2. When Rate of Depreciation is Given:

[Tex]Depreciation=\frac{Written~Down~Value~of~the~Asset\times{Rate~of~Depreciation}}{100}[/Tex]

Businesses choose different methods for calculating depreciation according to their need. One of the most prominent methods for calculating depreciation is the Written Down Value Method. Under this method of charging depreciation, the amount charged as depreciation for any asset is charged at a fixed rate, but on the reducing value of the asset every year. The amount of depreciation is deducted from the written down value (i.e., cost less depreciation) of an asset and charged on the debit side of the Profit and Loss A/c as a loss. The concerned asset is depreciated with an unequal amount every year, as the depreciation is charged to the book value and not to the cost of the asset.