Q.A machine costing ₹80,000 is depreciated at 20% per annum under the Written Down Value Method. Compute the depreciation for each of the first three years, and the book value at the end of the third year.

Each year's depreciation is 20% of the PREVIOUS year's book value, not of the original cost.

80,000 × 20% = 16,000; 64,000 × 20% = 12,800; 51,200 × 20% = 10,240.

Working: Year 1 depreciation = 80,000 × 20% = 16,000, leaving a book value of 80,000 − 16,000 = 64,000. Year 2 depreciation = 64,000 × 20% = 12,800 (NOT 80,000 × 20% again), leaving 64,000 − 12,800 = 51,200. Year 3 depreciation = 51,200 × 20% = 10,240, leaving 51,200 − 10,240 = 40,960.

Notice the depreciation AMOUNT falls every year (16,000 → 12,800 → 10,240) even though the RATE (20%) never changes — this is the defining feature of the Written Down Value Method.

The most common error under WDV is applying the rate to the ORIGINAL COST every year (as under SLM) instead of to the REDUCING book value — this would wrongly give the same ₹16,000 depreciation every year, missing the entire point of the 'diminishing balance' method.