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Reducing Balance Method

The reducing balance method, also known as the "diminishing balance method" or "declining balance method," is another method of depreciating assets.

In this method, the value of the asset is depreciated at a constant rate, which is based on a percentage of the asset's net book value (original cost minus accumulated depreciation). The depreciation expense decreases over time, as the asset's book value declines. The advantage of the reducing balance method is that it recognizes that assets typically lose value more quickly in the early years of ownership, and it reflects that in the higher depreciation expense in those years. The downside is that it can result in higher depreciation expenses in the early years, which may not accurately reflect the asset's actual decline in value.

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