Written down value method has the following advantages:
(a) This method is based on a more realistic assumption that the benefits from asset go on diminishing (reducing) with the passage of time. Hence, it calls for proper allocation of cost because higher depreciation is charged in earlier years when asset’s utility is higher as compared to later years when it becomes less effective.
(b) It results into almost equal burden of depreciation and repair expenses taken together every year on profit and loss account.
(c) Income Tax Act accepts this method for tax purposes.
(d) As a large portion of cost is written-off in earlier years, loss due to obsolescence gets reduced.
