Methods of depreciation

The depreciation method you choose affects your annual depreciation expense. Over time, each method allows you to depreciate approximately the same dollar amount. But while the end result is the same, annual depreciation amounts may differ significantly under different methods. Take an item with a $1000 depreciable value. Different methods may require you to depreciate:

• Straight-Line
  $100 each year for 10 years
• Sum of the Years' Digits
  $182 in the first year, and declining amounts for each of the next 9 years.
• Double-Declining Balance
  $200 in the first year, and declining amounts for each of the next 9 years.
• Units of Production
  Varying amounts each year depending on usage

You can choose a different method of depreciation for each asset you own. The method you choose will depend on the type of property and the needs of your business. For some kinds of assets, an accelerated method of depreciation will be more appropriate. For others, you may wish to keep it simple and expense the same amount each year.