Written Down Value (WDV) Method

Under the Written Down Value (WDV) Method — also called the Diminishing Balance Method or Reducing Balance Method — depreciation is charged EVERY YEAR at a FIXED PERCENTAGE, but applied to the asset's BOOK VALUE (original cost less depreciation already charged in earlier years), not to the original cost. Since the book value keeps shrinking each year, the actual RUPEE amount of depreciation charged also keeps shrinking year after year, even though the percentage rate itself stays the same throughout.

Depreciation for a year = Book Value at the start of that year × Rate of Depreciation (%)

Because each year's depreciation is only a percentage of an ever-smaller base, the book value under WDV, mathematically, approaches zero but never reaches it EXACTLY through the formula alone (in practice, the asset is written down to its estimated scrap value or fully written off in the final year by a separate, deliberate closing entry, or the accumulated depreciation and asset cost are simply squared off on final disposal). …