Sum of the digits method

The aim of this method is to show a higher depreciation charge in the early years of the life of an asset.

For example, the cost of asset is $4,200, the scrap value is $200, the estimaged usefullife is four years.

Sum of digits: 4 years + 3 years + 2 years + 1 years =10

The formula for sum of the digits is:

It gives the sum of the digits for any number of years. So the sum of the digits for four years is: 4*5/2=10.

Related posts:

1. Methods of calcuating depreciation
2. Reducing balance method
3. Straight line method of depreciation
4. Revaluation method
5. Property, plant and equipment