Q.A machine costing ₹1,00,000 has an estimated life of 4 years and a scrap value of ₹20,000. Compare the depreciation charged and the closing book value at the end of Year 1 and Year 2 under

SLM charges the same ₹20,000 every year on the original cost; WDV charges 25% of a shrinking base, giving ₹25,000 then ₹18,750 — a different pattern, though both land close together by Year 2.

SLM: (1,00,000 − 20,000) ÷ 4 = 20,000 flat every year. WDV: 25% of the reducing balance: 25,000 then 18,750.

(a) Straight Line Method: Annual depreciation = (1,00,000 − 20,000) ÷ 4 = 80,000 ÷ 4 = ₹20,000, identical every year.

(b) Written Down Value Method @ 25%:

Comparing the two: in Year 1, WDV charges a HIGHER depreciation (₹25,000) than SLM (₹20,000), because 25% of the full original cost still exceeds the flat SLM figure at this early stage. By Year 2, WDV charges a LOWER amount (₹18,750) than SLM's unchanging ₹20,000, since the WDV base has by then shrunk. Over the two years combined, WDV's cumulative depreciation (25,000 + 18,750 = 43,750) exceeds SLM's cumulative depreciation (20,000 + 20,000 = 40,000), so WDV leaves a LOWER closing book value (56,250) than SLM (60,000) at the end of Year 2 — this particular gap depends on the specific rate and life chosen, and will not be identical for every combination of figures.

Students sometimes assume the two methods must always give the SAME cumulative depreciation over any given number of years — whether WDV's cumulative charge ends up higher or lower than SLM's, at any particular point in an asset's life, depends entirely on the specific rate, cost and life chosen, and has to be worked out for each case rather than assumed.