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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

 

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

 

Entry Passed

Year 1

Depreciation A/c  Dr 500

  To Asset  500

 

Year 2

Depreciation A/c  Dr 450

  To Asset           450

 

Year 3

Depreciation A/c  Dr 405

  To Asset  405

 

SLM Method

EXAMPLE

Suppose Asset Value is 5000 and Depreciation Rate is 10% SLM.

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

 

Entry Passed here also is

Depreciation A/c Dr 500

  To Asset  500

 

Depreciation A/c  Dr 500

  To Asset  500

 

Depreciation A/c  Dr 500

   To Asset  500

  1. Accounts and Finance
  2. Step 3 Passing Book Closure Entries
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CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 6 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .
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