Final answer:
Straight line depreciation allocates equal depreciation expense each year, while reducing balance depreciation allocates more depreciation in the early years of an asset's useful life.
Step-by-step explanation:
Straight line depreciation and reducing balance depreciation are two different methods used to calculate the depreciation expense of an asset over its useful life.
Straight line depreciation allocates an equal amount of depreciation expense each year. This means that the depreciation expense remains the same throughout the useful life of the asset. It is calculated by subtracting the salvage value from the initial cost of the asset and dividing the result by the number of years in the asset's useful life.
Reducing balance depreciation, also known as accelerated depreciation, allocates more depreciation expense during the early years of an asset's useful life. This method assumes that an asset is more valuable in its early years and less valuable as it gets older. It is calculated by applying a depreciation rate to the carrying value of the asset, which decreases each year.