We know that there are 2 methods of depreciation

  1. WDV Method (Written down Value Method)
  2. 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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CA Maninder Singh is a Chartered Accountant for the past 8 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .