11 January 2014
In Written Down Value (WDV) method depreciation is charged on the reuced price. Example: Asset purchased for Rs. 100.00: Depreciation rate 10%. First year its value will be reduced to 90.00 (100-10% of 100) and in second year depreciation will be Rs. 9.00 i e 10% of 90. Similarly third year it will be Rs. 8.10. This way the value of asset never comes at Zero.
11 January 2014
In Straight Line Method (SLN) life of a asset is known then for the duration of life ever year an equal sum is taken as depreciation. Example Asset purchased for Rs. 100.00 Life ascertained 8 years and then every year a sum of Rs. 12.50 is charged to Depreciation and after 8th year its book value will be zero. WDV method is strongly recommended.
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