Written Down Value Method (WDV):
This method is also known as Diminishing balance method or Reducing balance method. Under this method, a xed percentage is written o every year on the book value of the asset at the beginning of the year.
Here the amount of depreciation goes on decreasing and therefore, the book value of asset will not become zero after its working life.
Amount of depreciation = Written Down Value of asset x Rate of depreciation
Straight Line Method:
Under this method a fixed amount is deducted from the value of an asset year after year on account of depreciation and debited to profit and loss account. This method is also called Fixed Instalment method, or Original Cost method. Under this method value of asset will be reduced to zero.
Depreciation = \(\cfrac {\text{Cost of the asset - scrap value}}{\text{Life of the asset}}\)
