Written Down Value (WDV) Method

Under the Written Down Value Method — also called the Diminishing Balance Method or Reducing Instalment Method — a FIXED PERCENTAGE rate of depreciation is applied every year, but the percentage is always applied to the asset's BOOK VALUE at the start of that year (original cost less all depreciation already charged), never to the original cost itself.

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

Since the book value keeps shrinking every year that depreciation is charged, the actual RUPEE amount deducted also keeps getting smaller year after year, even though the percentage RATE applied stays exactly the same throughout the asset's life. This produces heavier depreciation charges in the early years of an asset's life and progressively lighter charges later — the opposite pattern from the flat, unchanging charge under the Straight Line Method.

Mathematically, because each year's charge is only a fraction of an already-reduced base, the book value under the Written Down Value Method keeps approaching zero without the formula alone ever bringing it exactly to zero or to a pre-set scrap value; in practice, an asset is finally written down to its estimated scrap value, or written off completely, through a separate closing adjustment in the last year of its estimated life, or the account is simply closed out on the asset's eventual sale or disposal. …