Question

What are the advantages and limitations of the straight line method?

Answer 1

The advantages and limitations of the straight line method are as follows:

Advantages of the straight line method:

1. It is simple to understand and apply.
2. It is easier to compare profits as an equal amount of depreciation is charged every year.
3. It is useful for those assets whose usage is made on a constant basis and the useful life of the asset can be determined easily.
4. The asset value can be completely written off using this method.
5. Asset value can be made zero value at the end of useful life.

Limitations of the straight line method:

1. It ignores the actual use of the asset
2. It does not take into consideration that the depreciation on the asset will be more as it becomes old.
3. It does not consider the loss of interest received for the amount invested in the asset.

Also read:

• True and False Questions on Depreciation
• What Is Depreciation
• MCQs on Depreciation

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