Explain the different methods of calculating depreciation value with a suitable example.

Depreciation is an accounting method used to allocate the cost of tangible assets (such as buildings, machinery, vehicles, etc.) over their useful life. It reflects the reduction in the asset's value due to wear and tear, obsolescence, or the passage of time. There are several methods for calculating depreciation, each with its own principles and formulas. Let's explore the most common depreciation methods with suitable examples:

1. Straight-Line Depreciation Method:

   The straight-line method evenly distributes the cost of an asset over its useful life. It is calculated using the following formula:

   Depreciation Expense = (Cost of Asset - Salvage Value) / Useful Life

   Where:

   • Cost of Asset: The original cost of the asset.
   • Salvage Value: The estimated residual value of the asset at the end of its useful life.
   • Useful Life: The expected number of years or units of production the asset will be used.

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