Glossary
Straight-line method
A way of charging the same amount of depreciation every year of an asset's life.
What it means
A depreciation method that spreads the depreciable amount evenly over the asset's useful life, giving an equal charge each period.
Example
An asset costing RM50,000 with RM5,000 residual value over 5 years is charged RM9,000 a year.
Why it matters
Its even charge suits assets used steadily over time and makes budgeting simple.
In practice
Under the straight-line method the same depreciation expense appears in the income statement every year. It builds up steadily in the provision for depreciation account, which is set against the asset's cost in the statement of financial position. The annual charge is cost, minus residual value, divided by the useful life in years.
A delivery van costs RM24,000, with an expected residual value of RM4,000 and a four-year life. The charge is (24,000 - 4,000) divided by 4, which is RM5,000 each year. Net book value falls evenly to RM4,000.
This contrasts with the reducing balance method, where a fixed percentage is applied to a shrinking balance. That gives a large charge early and smaller charges later. Straight-line is preferred for assets that give roughly equal service each year, such as fixtures, fittings and buildings. Its constant figure is simpler to calculate and to check.
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Related terms
Syllabus reference: Cambridge 0452 and 0985, syllabus for 2027 to 2029, sub-topic 4.2 Depreciation and disposal of non-current assets (page 14).
Definitions here are general accounting explanations for study. For your board's exact wording, see its official syllabus via Sources.
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