Straight line method / Fixed installment method
It is a methods of calculating depreciation.
Under this method, a fixed percentage on the original cost of the asset is written off every year so that the value of the asset becomes zero at the end of its life period.
The amount of depreciation charged annually will be constant.
This method is useful when the service rendered by the asset is uniform from year to year.
Depreciation = Total cost - Scrap value Estimated life
Advantages of Straight-line method
Simplicity
Equal distribution of depreciation to P/L Account throughout the life of asset.
Asset is completely written off.
Disadvantages of Straight line method
Difficulty in calculation when additional assets are purchased.
Uneven charge to P/L Account Total charge of depreciation and repairs on assets will be lighter in the earlier years and heavier in the later year years.
Unrealistic assumption that the asset gives equal result over different years
