We know that there are 2 methods of depreciation
- WDV Method (Written down Value Method)
- SLM Method (Straight Line Method)
WDV Method
Suppose Asset Value is 5000 and Depreciation Rate is 10% WDV.
Depreciation will be computed as follows
Particulars | Year 1 | Year 2 | Year 3 |
Opening Value | 5000 | 4500 | 4050 |
Less Dep 10% | 500 | 450 | 405 |
Closing Value | 4500 | 4050 | 3645 |
Hence Closing Value of One Year becomes opening Value of Next Year on which Depreciation is calculated
SLM Method
EXAMPLE
Suppose Asset Value is 5000 and Depreciation Rate is 10% WDV.
Depreciation will be computed as follows
Particulars | Year 1 | Year 2 | Year 3 |
Opening Value | 5000 | 4500 | 4000 |
Less Dep 10% | 500 | 500 | 500 |
Closing Value | 4500 | 4000 | 3500 |
Hence, depreciation value is same every year in SLM Method
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