Question

why is reducing balance method more reliable than fixed installment method ​

Answer 1

Dear student

In fixed instalment method​depreciation is charged on the original cost while in reducing balance method, depreciation is charged on the book value of asset.

The amount of depreciation is same over the life of assets in fixed installment method. while it n decreases every year in reducing balance method.

Fixed installment method of depreciation is not acceptable for tax purpose. Reducing balance method is acceptable for tax purpose.

Due to above differences reducing balance is reliable than fixed installment method.

Regards