What is a Declining Balance Method?
The declining balance method is a way of measuring the loss in value of a fixed asset, such as a piece of equipment. Specifically, this is a common method of measuring the loss in value of heavy machinery. The declining balance method is one of the most popular choices for determining depreciation costs. Companies must keep track of the loss in value of assets for a number of reasons. One of the biggest reasons is that investors and lenders demand an accurate account of the company’s assets before investing. Without the declining balance method, or some other method of evaluating value lost, the company cannot provide that accurate picture. Depreciation costs are generally listed on a company’s earnings statement. To understand how a declining balance method works, it is first necessary to understand how depreciation works. The raw materials in a machine or other item is usually worth something, even as salvage, so hardly anything built to last will depreciate totally. The difference b
