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Straight Line Method = Assets Value - Scrap Value / Estimated Life this is used for Every year
Double declining Method= 1st Year same percentage as decided but in the 2nd year as follow
Assets value - 1st year year depreciation * double rate of depreciation and so on
A straight line depreciation Formula is simple = Asset Value - Salvage Value / Useful years (life of the asset). Basically, the total cost of the asset will be divided by the number of the life of the asset and then you will have your annual depreciation cost. It is simple and straight forward.
The double declining balance: basically puts more weight on the early years of the asset and then the depreciation expense of the asset gets reduced through the year. it is best described in an example: Assume you purchased an asset for $ 100,000 for 5 years. So, the first year depreciation will be
1- 100,000/5 = 20,000
2- Double it = 20,000* 2 = 40,000 (your depreciation expense for this year)
3- Asset value for next year will be = 60,000
4- Depreciation Expense for next year will be = 60000/5 = 12,000 x 2 = 24000
And so on.
I hope that the answer above helped your in clarifying the differnce
1. STRAIGHT-LINE DEPRECIATION
It is calculated by subtracting an asset’s expected salvage value from its capitalized cost, and
then dividing this amount by the estimated life of the asset. For example, a candy wrapper machine has
a cost of $50,000 and an expected salvage value of $10,000. It is expected to be in service for eight
years. Given these assumptions, its annual depreciation expense is:
= (Cost – salvage value) /number of years inservice
= ($50,000 – $10,000) /8 years
= $40,000/8 years
= $5,000 depreciation per year
2. DOUBLE DECLINING BALANCE DEPRECIATION
The double declining balance method (DDB) is the most aggressive depreciation method for recognizing the bulk of the expense toward the beginning of an asset’s useful life. To calculate it, determine the straight-line depreciation for an asset for its first year (see the last section for the straight-line calculation). Then double this amount, which yields the depreciation for the first year.
Then subtract the first-year depreciation from the asset cost (using no salvage value deduction), and run the same calculation again for the next year. Continue to use this methodology for the useful life of the asset. For example, a dry cleaning machine costing $20,000 is estimated to have a useful life of six years. Under the straight-line method, it would have depreciation of $3,333 per year. Consequently, the
first year of depreciation under the 200% DDB method would be double that amount, or $6,667. The
calculation for all six years of depreciation is noted in Exhibit.
