Which type of depreciation results in higher expenses in the early years of an asset's life?

Declining balance depreciation is based on a fixed percentage of the asset's remaining book value each year, which means that the expense recorded is higher in the earlier years when the asset's book value is greater. As the asset ages and its book value declines, the depreciation expense decreases correspondingly. This method results in accelerated depreciation, allowing for greater tax deductions and expense recognition in the initial years of the asset's life.

In contrast, straight-line depreciation allocates an equal amount of expense every year throughout the asset's life, leading to consistent annual expenses. Units of production depreciation ties the expense to the actual usage of the asset, which can vary from year to year without a predictable pattern. Sum-of-the-years'-digits also accelerates depreciation; however, the decline in expense is not as steep as in the declining balance method. Therefore, declining balance depreciation is the choice that maximizes early-year expenses effectively.