Depreciation method is a set formula used in estimating an asset’s use, wear, or obsolescence over the asset’s useful life. A depreciation method is required to allocate, in a systematic way, the total amount to be depreciated between each accounting period of the asset's useful economic life. This method helps in calculating the allowable annual tax deduction for depreciation.
There are various depreciation methods. Some of them are:
Straight-line depreciation method
Reducing balance method or Declining balance method
Written down value method