Accountancy · Ch 10 — Depreciation Accounting
Comparison of the Straight Line Method and the Written Down Value Method
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Comparison of the Straight Line Method and the Written Down Value Method
| Basis | Straight Line Method (SLM) | Written Down Value Method (WDV) |
|---|---|---|
| Base for computing depreciation | Original cost, every year | Book value (reducing every year) |
| Amount of depreciation each year | Same (equal) every year | Decreases every year |
| Book value at the end of useful life | Reaches scrap value (or zero) exactly | Approaches zero but never reaches it exactly through the formula alone |
| Combined charge (Depreciation + Repairs) over the years | Rises over time, as repairs typically increase with an ageing asset while depreciation stays flat — total charge to Profit and Loss Account is uneven, rising | Stays relatively even over time, since falling depreciation broadly offsets rising repairs as the asset ages |
| Suitability | Assets that depreciate fairly evenly and need little rising maintenance (e.g., leases, patents, furniture) | Assets where repair/maintenance costs rise significantly as the asset ages (e.g., machinery, vehicles) |
| Accepted for Income Tax computation in India | No (Income Tax Act prescribes WDV for most asset blocks) | Yes, for most classes of assets |