Wdv and slm method of depreciation for book

If the slm method depreciation is greater than the wdv method mathematically, an asset of 5 years life has greater wdv method during year 1 and year 2 and in the third year slm method is better compared to wdv method. There are various methods of providing depreciation the most common being the straight line method slm. The use of book value the balance brought forward from the previous year and fixed rate of depreciation result in decreasing depreciation charges over the life span of the asset. However in the present scenario when we are using the written down value method of depreciation, the net book value of the asset at the end of the 8th year is rs. In this method of depreciation, a fixed rate of depreciation is charged on the book. The straightline method of depreciation slm is one of the methods of calculating depreciation and is the simplest and most often used.

Under slm, the depreciation is charged each year till the value of the asset is reduced to zero or to its scrap value. In this method depreciation is charged on the book value of asset and book value is decreased each year by the depreciation. Wdv is a method of depreciation in which a fixed rate of depreciation is charged on the book value of the asset, over its useful life. Slm is a method of depreciation in which the cost of the asset is spread uniformly over the life years by writing off a fixed amount every year. Generally, if we uses straight line method, then depreciation amount.

So, here we are going to throw light on the difference between slm and wdv methods. The wdv is best determined through the diminishing or depreciating balance method as it is more realistic and accurate compared to the slm which assumes a constant depreciation value per year. Conversely, in written down value method wdv, there is a fixed rate of depreciation which is applied to the opening balance of the asset every year. Asset depreciation method change depreciation method. Written down value wdv method of depreciation involves charging depreciation at a specified rate on the opening book value of the fixed asset for each accounting period. In the example we discussed in the straight line methods of depreciation we had seen that, at the end of the 8th year, using the straight line method, only rs. Written down value method vs straight line method of depreciation. This is the other name of written down value wdv method as. Written down value method is an appropriate method for matching the expenses to revenues as most of the longlived assets generate more benefits in the early years of their economic life and fewer benefits in the later years of their life and it ensures the same by more depreciation expenses in the early years and fewer depreciation expenses in the later years of the assets useful life. When an asset is amortized to zero, it can be taken off the books or may need to be renewed. Difference between written down value wdv and straight line. Only one name is allocated to this method its straight line method of depreciation. In this method depreciation is charged on the book value of asset and book.

Written down value method of depreciation calculation. Also in income tax act, depreciation is allowed as per wdv method only. Different methods of depreciation calculation sap blogs. Excluding change of method difference between slm and wdv. Concept of written down value method of depreciation. Here we discuss how to calculate wdv depreciation along with practical examples. This method applies depreciation two times the straightline rate. Under this method, the depreciation is calculated at a certain fixed percentage each year on the decreasing book value commonly known as wdv of the asset book value less depreciation. Difference between slm and wdv with comparison chart. Written down value or reducing diminishing balance method. Accounting process class 11th written down value method. Straight line vs written down value wdv method of depreciation. Difference between slm and wdv method of depreciation. Compare the arithmetical difference between slm and wdv method of.

This method involves applying the depreciation rate on the net book value nbv of. Depreciation means the decrease in the value of fixed assets due to normal wear and tear, efflux of time etc. In this method the charge of depreciation for each accounting. One of the most common and popular types of wdv method is the double declining balance method.