Straight line of method of depreciation can be defined as method under which depreciation amount remains fixed and is calculated using a predetermined formula and at the end of useful life of machine the value of machine becomes zero. Here is the list of advantages and disadvantages of straight line method which is used for calculating depreciation –
- It is simple to understand and easy to apply
- It makes possible to distribute the deprecation cost over useful life of the asset uniformly.
- Since under this method same amount is charged as depreciation, it makes the comparison of profits for several years easy.
- Since it charges same depreciation for each year, it does not take into account factor that as years passes the efficiency of machine declines.
- It cannot be used for those machines where it is difficult to estimate the useful life of the machines.