1. What is Percentage Rate of Annual Depreciation?

Percentage Rate of Annual Depreciation is used in constant percentage method which relates the scrap value, original cost and life of property. It represents the annual rate at which an asset loses its value over time.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( P \) — Percentage Rate of Annual Depreciation
• \( Sc \) — Scrap Value of the asset
• \( OC \) — Original Cost of the asset

Explanation: The formula calculates the depreciation rate by comparing the scrap value to the original cost, showing what percentage of value the asset loses annually.

3. Importance of Depreciation Calculation

Details: Accurate depreciation calculation is crucial for financial reporting, tax calculations, asset management, and determining the true value of assets over time.

4. Using the Calculator

Tips: Enter scrap value and original cost in the same currency units. Both values must be positive, and scrap value should not exceed original cost.

5. Frequently Asked Questions (FAQ)

Q1: What is scrap value?
A: Scrap Value is the worth of a physical asset's individual components when the asset itself is deemed no longer usable.

Q2: What is original cost?
A: Original Cost is the total cost associated with the purchase of an asset, including purchase price and any additional costs to make it ready for use.

Q3: When is this depreciation method used?
A: The constant percentage method is commonly used for assets that lose value at a consistent rate over time.

Q4: Are there limitations to this calculation?
A: This method assumes a constant depreciation rate, which may not reflect actual asset usage patterns in all cases.

Q5: How does this relate to asset life?
A: The depreciation rate helps determine the useful life of an asset and its declining value over that period.