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annuity method


'annuity method' can also refer to...

 

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A method of calculating the depreciation on a fixed asset. The objective of the method is to produce an approximately constant annual charge for the total depreciation and cost of capital of an asset. It is calculated in such a way that a low depreciation charge is made in the earlier years when interest costs are high, and a higher charge is made in the later years when interest costs are lower. It is less popular than the straight-line method or the diminishing-balance method.

Subjects: Accounting.


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