Declining Balance Method of Depreciation

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Declining Balance Method

A way of calculating the depreciation of an asset whereby one subtracts a certain percentage of its current value each year. For example, suppose an asset costing $100,000 depreciates 10% each year. After the first year, it depreciates to $90,000. In the second year, one deducts 10% from the $90,000, rather than the original $100,000. Thus, the depreciated value after the second year is $81,000. This is a common means of calculating depreciation.

An accelerated method of depreciation under which the depreciable basis for the following year is reduced by the depreciation deduction taken in the current year. The depreciation decution therefore decreases each year.

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