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What is the importance of Straight Line Method?
Straight Line depreciation is a tool or method that tells the amount related to carrying of an asset till it is useful. It explains that a fixed asset of a company gets reduced value as time spends. Though it has purchased in a proper amount or its initial value was higher, but after a fixed time its value reduces. This is simple method and followed by every company.
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What are the various steps of a straight line method?
These are as follows –
- What is the initial cost of an asset?
- Now, what is the projected salvage value based on the amount that is recorded.
- After that evaluate the estimated time that is useful for the asset.
- Now get an exact depreciation rate by dividing 1 by used year as if 5 years, then it must be 1/5 years.
- Finally you just need to get its actual value by multiplying the depression rate with asset cost.
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 What are the terms related to this?
The different terms are as follows-
- Debit
- Credit
- Asset
- Liabilities
- Equity’s share
- Salvage value
- accounting Entry
- Mid-month Convention
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