Question

(400 words required this sucject is hospitality accounting Please write clear your own thought or search the internet. Thank you!)

this is all the requestments

Discuss the 4 methods of depreciation. Which method is best for the hospitality industry?

Answer 1

1) Straight line method : In this method cost of asset is equally divided over the usefull life of the asset. It is easiest method of depreciation to understand and calculate

Depreciation under straight line method = Cost of asset less salvage value / No. of years of useful life

2) Reducind balance method : In this method depreciation is charged at fixed rate like in SLM but it is not calculated on cost of fixed asset but on it's carrying amount

For eg if Depreciation rate is 10% and cost of asset in 100, then year 1 depreciation = 100*10% = 10 , year 2 depreciation =(100-10)*10% = 9 and so on

3) MACRs depreciation : It is method provided by US tax law. here specific % of depreciation are given which are to be applied on cost of the asset

4) Declining balance method : here depreciation rate is doubled than that of SLM. Here it is believed that asset is more productive during early stage of life, hence more depreciation should be given at early stage of life and less on latter party of life

In hospital depreciation should be based on declinig balance method, As equipment are used more during their early life