Reducing balance method charges depreciating as fixed percentage of the

The reducing balance method of calculating depreciation charges a fixed percentage of the net book value of the asset. Net book value refers to the cost of the asset minus the accumulated depreciation on the asset. Let's say you have an asset worth $100,000 and the fixed percentage used to calculate depreciation is 20%. The first year, the depreciation would be calculated as 20% of the net book value, which would be $100,000. So, the depreciation for the first year would be $20,000. In the next year, the net book value would be $80,000 (which is $100,000 minus $20,000), and the depreciation would be calculated as 20% of the new net book value, which would be $16,000. This process continues, with the depreciation being calculated as a fixed percentage of the decreasing net book value each year, resulting in the depreciation charges reducing over time.