Definition of Accelerated Depreciation



Accelerated depreciation is a method of depreciation that charges higher depreciation on an asset in earlier years. The rate of depreciation is faster as compared to straight-line depreciation in the first year and gradually reduces.

 


Assume a building has a cost of $500,000 and a useful life of 5 years with a salvage value of $50,000. The straight-line depreciation will be $90,000 per year, i.e. (500000-50000)/5. If the depreciation is charged on an accelerated depreciation method, like the double-declining method, the depreciation will be charged at twice the rate of straight-line depreciation, i.e. (1/5 = 20% x 2 = 40%) This way the depreciation in the first year will be ($500,000-$50,000) x 40% = $180,000.


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