Question

Give any four difference between Fixed Instalment method and Diminishing Value method for providing depreciation.

Answer 1

Fixed Instalment	Diminishing value
1. Amount of depreciation is same every year.	1. The amount goes on reducing year.
2. Depreciation is calculated on original cost	2. Depreciation is calculated on reducing balance of asset.
3. Value of asset can be written down to zero or scarp value	3. Value of assets cannot be written down to zero
4. This method is useful for assets of lesser value such as furniture, patents etc.	4. This method is useful to the assets with more value and longer life such as buildings, machinery, etc.