Question
What are the merits and demerits of written down value method?
Distinguish it from the straight-line method.
Answer :
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The Written Down Value (WDV) method, also known as the Diminishing Balance Method or Reducing Balance Method, is a method of calculating depreciation in which depreciation is charged at a fixed percentage on the book value of an asset at the beginning of each accounting year. Since the book value decreases every year, the amount of depreciation also decreases year after year. This method is commonly used for assets whose efficiency and earning capacity decline over time. Under the WDV method, depreciation is calculated as: Depreciation = Opening Book Value × Rate of Depreciation For example, if an asset costs ₹1,00,000 and depreciation is charged at 20%, depreciation in the first year will be ₹20,000. The
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