Question

Distinguish between Straight line and Diminishing Balance Method of charging Depreciation on the basis of: 

(a) Depreciation Charge 

(b) Amount of Depreciation 

(c) Suitability 

Answer 1

Basis	Straight Line Method	Diminishing Balance Method
Depreciation Charge	Depreciation is calculated on original cost of a fixed Asset	Depreciation is calculated on Written Down Value or diminishing balance of a fixed Asset
Amount of Depreciation	The amount of depreciation remains same for all years	The amount of depreciation diminishes each year chronologically
Suitability	This method is more suitable for assets which get depreciated on account of expiry of working life of an asset.	This method is more suitable for assets which require more maintenance in later years of working life.