Three methods, one total.

They spread the same amount differently. Every row says which figure that year’s charge was worked out from — which is the only thing that really separates them.

Cost

Scrap value

Useful life (years)

Method

Rate % Reducing balance only. Leave it blank and it will be worked out from the cost and the scrap value.

The one that is always got wrong

Under reducing balance the rate is applied to the book value at the start of the year, not to the cost. 20% of 1,00,000 is 20,000 in year one and 16,000 in year two, not 20,000 again.

Under straight line it is the cost, every year, which is why the charge never changes.

Why reducing balance never finishes

A percentage of what is left is always something, so the asset is never quite written off. That is the method behaving correctly, not a fault. Sum of the years’ digits is heavier early in the same way but does reach the scrap value exactly.

The odd paisa

When the cost less the scrap value does not divide by the life, the remainder goes in the last year rather than being spread as a rounding error. The closing figure is the scrap value to the paisa, or the schedule is wrong.