Hi buddy,
To calculate the depreciation of an asset, there are 2 methods of valuation – the Written Down Value (WDV) method and the Straight Line Method (SLM). Of these, the written down value method is used for income tax purposes.
After accounting for its amortization or depreciation, accountants arrive at the asset’s written down value. In simple words, it’s the current value of the asset.
It is helpful to calculate the depreciation because it offers some tax benefit for the loss in the asset’s value over time.
The written down value method is also known as the diminishing balance method, reducing installment method, reducing balance, or the reducing value method.
Now you know what is written down value method.
The written down value is calculated as Rate of Depreciation:
1 - [ s / c ] 1/n = R
Where,
‘R’ = Rate of Depreciation
‘n’ = useful life of the asset.
‘c’ = the present written down value.
‘s’ = the scrap value at the end of the period, that is ‘n’.
- Let me explain this using an example:
Let’s say the cost of the asset is Rs 1 Lakh.
Depreciation for the 1st year = 10 percent
For the 1
st
year, the depreciation = Rs. 10000
For the 2
nd
year, the depreciation = Rs 10,000 (10 percent of Rs. 90000) = Rs. 9000
For the 3
rd
year, the depreciation = 10 percent of Rs 81000 [i.e., 90000 – 9000] = Rs 8100
Related Answers:
Which method of depreciation is approved by income tax act?
How to calculate depreciation as per Income Tax Act?
How to calculate depreciation of building?
I hope you like my answer on what is written down value method
Your Feedback Matters! How was this Answer?
Shifting, House?
✔
Lowest Price Quote✔
Safe Relocation✔
Professional Labour✔
Timely Pickup & Delivery
Intercity Shifting-Upto 25% Off
Check Prices
Intracity Shifting-Upto 25% Off
Check Prices
City Tempo-Upto 50% Off
Book Now
What is written down value?
Sai Ch.
777 Views
1
4 Year
2021-12-03T16:46:05+00:00 2021-12-07T18:08:04+00:00Comment
Share