Question

Distinguish between Straight line method and Diminishing Balance method.

Answer 1

Basis of Difference	Straight Line Method	Written Down value Method
Basis of charging depreciation	Original Cost	Book value i.e. original cost less depreciation charged till date in this method,depreciation declines year after year
Annual depreciation charge	Fixed (Constant) year	Declines year after year
Total charge against profit and loss account respect of depreciation and repairs	Unequal year after year. It increases in later years.	Almost equal every year
Recognition by Income Tax law	Not recognised	Recognised