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Which is the suitable method for calculating depreciation of Fixed Assets used in Production line ?

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Question added by Safeer Koyithan Kandy , General Accountant , Hala Trading
Date Posted: 2014/12/10
Lesley Lanag CMA CPA
by Lesley Lanag CMA CPA , Senior Accountant , Takaful Emarat Insurance (P.S.C)

If we can determine the capacity of the equipment in terms of units, then the best depreciation method is the unit-of-production method.

Ahmed kandil
by Ahmed kandil , Cost Controller , Battour Holding Cpompany

The method a company should use is the one that best matches revenue with expenses. The method of depreciation should not be selected on the basis of which method of depreciation will result in a desired net income amount, however.

If the revenues management expects to receive from the use of an asset will be constant over its useful life, straight-line depreciation should be used so that the costs will also be constant over the asset’s useful life.

 

In contrast, if revenues from the use of the asset will be higher at the beginning of the asset’s life, then an accelerated method of depreciation should be used. note that all depreciation methods is accelerated except straight line method 

Sajid Hussain Penukonda
by Sajid Hussain Penukonda , Executive Finance , Excellence Data Research Private Limited (Cognizant Group)

Appropriate method of depreciation for fixed assets in production line would be reducing balance method charges depreciation at a higher rate in the earlier years of an asset.  The amount of depreciation reduces as the life of the asset progresses.

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