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
