There are three different depreciation methods. First is the Activity method which assumes that appreciation is a function of use or productivity, instead as the passage of time. This method is also known as the variable charge or units of production approach. The next method of depreciation is called the Straight line method. The Straight line method considers depreciation a function of time rather than a function of usage and because of the simplicity of this method, it is widely used by companies. The third method of depreciation is called the Decreasing-charge methods. Decreasing charge methods provide for a higher depreciation cost in the earlier years and lower charges in later periods. This method is also known as accelerated-depreciation methods because these methods allow for higher early-year charges than in the straight line method. This method is split up into two parts. The first part is called the Sum of the years method which results in a decreasing depreciation charge based on a decreasing fraction of depreciable cost. The second part of Decreasing charge methods is called the Declining balance method. The Declining balance method utilizes a depreciation rate that is some multiple of the straight line method. When you compare and contrast these different methods they are similar because you have to match the cost of and asset to the periods that benefit from the use of that asset and this profession requires that the depreciation method employed be systematic and rational.
When calculating these different methods of depreciation you must use the formula for that method. First is the formula for the Activity method. To calculate this method you must take the cost less salvage and multiply it by the hours per year, then divide that total by the total estimated hours and you will get the depreciation charge total. For the straight line method you