Recently i came across a depreciation method called written down value. I knew only about straight line method before this . So could anyone enlighten me about the other methods used for depreciation.
Re: Written Down value: Depriciation method
6 years, 2 months ago #28
Yes apart from the straight line method there are 2 other methods for calculating depreciation which are written down value and declining balance. In straight line method, the depreciation is calculated as asset cost /years. Whereas in written down value it ignores the salvage value in calculating the depreciable base and the declining balance method is similar to straight line except the depreciable amount value depends on the user.
Written down value is usually applicable to machines that have high rates of depreciation in the initial year or two, and later taper. In this method, depreciation is charged at a fixed rate every year on reducing balance. A certain percentage is applied to the previous year’s book value, to arrive at the current year’s depreciation/ book value, which shows declining balance, weighted for initial years, and lower for later years, as the machine grows older.Accelerates depreciation taken in early years. Reduces the amount taken in later years. Ignores salvage value; starts with depreciable base = asset cost.