Distinguish between the Straight Line Method and the Written Down Value Method of providing depreciation.

Question

Accepted Answer

| Basis | Straight Line Method (SLM) | Written Down Value Method (WDV) |
|---|---|---|
| Base of calculation | Original cost (fixed, unchanging) | Book value at the start of each year (reduces every year) |
| Annual depreciation amount | Same (equal) every year | Different — reduces every year |
| End-of-life book value | Reaches exactly the estimated scrap value | Mathematically never reaches exactly zero |
| Depreciation + repairs, over time | Rises (repairs increase while depreciation stays fixed) | Stays roughly level (falling depreciation offsets rising repairs) |
| Ease of computation | Simple, same figure every year | More complex, base changes every year |
| Typical use | Assets with fairly even wear, known life/scrap value (e.g., furniture, leases) | Assets that lose value fast early on (e.g., machinery, vehicles); accepted for income-tax purposes in India |
| Also known as | Fixed Instalment Method, Original Cost Method | Diminishing Balance Method, Reducing Balance Method | …

Q.Distinguish between the Straight Line Method and the Written Down Value Method of providing depreciation.

Concept understanding — Written Down Value Method and Comparison with SLM

Basis	Straight Line Method (SLM)	Written Down Value Method (WDV)
Base of calculation	Original cost (fixed, unchanging)	Book value at the start of each year (reduces every year)
Annual depreciation amount	Same (equal) every year	Different — reduces every year
End-of-life book value	Reaches exactly the estimated scrap value	Mathematically never reaches exactly zero
Depreciation + repairs, over time	Rises (repairs increase while depreciation stays fixed)	Stays roughly level (falling depreciation offsets rising repairs)
Ease of computation	Simple, same figure every year	More complex, base changes every year
Typical use	Assets with fairly even wear, known life/scrap value (e.g., furniture, leases)	Assets that lose value fast early on (e.g., machinery, vehicles); accepted for income-tax purposes in India
Also known as	Fixed Instalment Method, Original Cost Method	Diminishing Balance Method, Reducing Balance Method

Q.Distinguish between the Straight Line Method and the Written Down Value Method of providing depreciation.

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