DEPRECIATION
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
19 March 2011
dear sir
what is the diff between WDV AND SLM METHOD
what is the diff between WDV AND SLM METHOD
19 March 2011
SLE Method we will consider no. of year.
dep = Value of asset- scarp value / no. of years of use ful life
depreciation value is same for all years.
IN WDV Method we will % as dep rate. every year we will caluclate % dep on written down value
dep = Value of asset- scarp value / no. of years of use ful life
depreciation value is same for all years.
IN WDV Method we will % as dep rate. every year we will caluclate % dep on written down value
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20 March 2011
SLM = straight line method
Since the amount of depreciation is the same from one year to the next, there is no need to be concerned with recalculating the rate of depreciation each tax period. Calculating straight-line depreciation begins by considering the total purchase price of the asset and determining the number of years that the asset will be considered useful.
While the yearly rate may vary, all methods will eventually reduce the asset's value to zero. Straight line depreciation is comparatively the simplest of the all the methods. To calculate it, the asset's salvage value is first deducted from its purchase cost.
WDVM = written down value method
The written down value method is an accelerated method of depreciating assets. This method assumes that assets are more efficient and productive during their initial usage periods. Hence, there arises the need to provide higher depreciation on the assets during their initial times. The amount of depreciation is very high initially and then keeps decreasing as time progresses. By the end of its useful life, the asset's value is completely written off.
For example, if the cost of the asset is Rs. 1,000 the rate of depreciation is 10 % on Rs. 1,000 i.e., Rs. 100, in the second year, it will be 10 % on Rs 900 i.e., Rs. 90 is the third year, it will be 10 % on Rs 810 (900-90) i.e., Rs. 81 and so on.
Since the amount of depreciation is the same from one year to the next, there is no need to be concerned with recalculating the rate of depreciation each tax period. Calculating straight-line depreciation begins by considering the total purchase price of the asset and determining the number of years that the asset will be considered useful.
While the yearly rate may vary, all methods will eventually reduce the asset's value to zero. Straight line depreciation is comparatively the simplest of the all the methods. To calculate it, the asset's salvage value is first deducted from its purchase cost.
WDVM = written down value method
The written down value method is an accelerated method of depreciating assets. This method assumes that assets are more efficient and productive during their initial usage periods. Hence, there arises the need to provide higher depreciation on the assets during their initial times. The amount of depreciation is very high initially and then keeps decreasing as time progresses. By the end of its useful life, the asset's value is completely written off.
For example, if the cost of the asset is Rs. 1,000 the rate of depreciation is 10 % on Rs. 1,000 i.e., Rs. 100, in the second year, it will be 10 % on Rs 900 i.e., Rs. 90 is the third year, it will be 10 % on Rs 810 (900-90) i.e., Rs. 81 and so on.
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