Depreciation spreads the cost of a fixed asset as an expense over its useful life. Straight line applies the same rate to cost every year, so the charge is equal each year. Reducing balance applies the rate to the previous year's closing written-down value, so the charge is higher at first and lower later. The calculator below produces a year-by-year table for both.
Example: a BDT 15 lakh machine at 20%, reducing balance. Year 1: BDT 3 lakh, WDV BDT 12 lakh. Year 2: 20% of 12 lakh = BDT 2.4 lakh, WDV BDT 9.6 lakh. The same machine at 20% straight line: BDT 3 lakh every year, fully depreciated in five years.
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Which method when
The method and rates are set in your accounting policy and must be applied consistently. If they change, the reason and effect are disclosed in the notes.
| Method | Suits assets that | Typical examples |
|---|---|---|
| Reducing balance (RB) | Work hardest in the early years and need more repairs later | Machinery, vehicles |
| Straight line (SL) | Provide service evenly over their life | Computers, software, leasehold improvements, buildings |
Full year or pro-rata in the first year
Many companies charge a full twelve months of depreciation in the year an asset is bought, whenever it was bought. Others charge only for the months it was used. Keep 12 in "months used in the first year" for a full-year policy, or enter fewer months for pro-rata.
Accounting rates versus tax rates
Financial statements use your accounting policy rates; the income tax computation uses the rates in the Income Tax Act's schedule. When they differ, the asset's accounting and tax written-down values differ, and that difference creates deferred tax. For a whole register, see our free fixed asset register Excel.
Frequently asked questions
Why does reducing balance never reach zero?
Each year a percentage of the remaining value is removed, so the value gets very small but never mathematically zero. When the asset is sold or scrapped, the remaining value is removed from the books.
Is land depreciated?
No. Land is not treated as having a limited life, so it is not depreciated. Buildings on it are.
Are the calculator's rates the tax rates?
No, you enter the rate. For tax, use the rates in the current Income Tax Act schedule.
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Written by the EOMS Hisab accounts team. Last reviewed: . Bangladesh rules change with each Finance Act, SRO and circular. Check rates and thresholds against the latest official source before relying on them.