Differences Between Fixed Installment And Reducing Balance Method Of Depreciation

Following are the main differences between fixed installment method and reducing balance method of depreciation:

Basis

Depreciation is charged on the original cost of assets in fixed installment method. In reducing balance method, depreciation is charged on the book value of asset.

Yearly Depreciation

The amount of depreciation is the same in each year over the life of assets in fixed installment method. The amount of depreciation decreases every year in reducing balance method.

Ending Value

In fixed installment method, book value of asset generally reaches to zero. Book value of asset does not reach to zero in reducing balance method.

Acceptance

Fixed installment method of depreciation is not acceptable for tax purpose. Reducing balance method is acceptable for tax purpose.