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Hod do i calculate depreciation using a sum of digits method
Welcome to the OT forums!
It is not examinable in AA (because it is not examinable in FA) but here’s an example if you are interested:
Asset useful life is 4 years, the sum of the digits is 1+ 2 + 3 + 4 = 10. Depreciation in year 1 is 40%, 30% in year 2, 20% in year 3 and 10% in the last year. It’s like a reducing balance method, though reducing balance just gets smaller and smaller; is not nil after a specified number of years.
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