Annuity Method:

The annuity method considers that the business besides loosing the original cost of the asset in terms of depreciation and also looses interest on the amount used for buying the asset. This is based on the assumption that the amount invested in the asset would have earned in case the same amount would have been invested in some other form of investment. The annual amount of depreciation is determined with the help of annuity table. This method is used to calculate depreciation amount on lease.