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CA FOUNDATION: ACCOUNTING · DEPRECIATION ACCOUNTING

Depreciation: written down value method (WDV)

WDV charges a fixed % on the opening book value each year: depreciation in year n = Cost × (1 − r)^(n−1) × r.

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Worked examples

Example 1 · level 1

Patel Brothers bought a delivery van for ₹10,90,000. Depreciation is charged @ 10% p.a. on the written down value. Find the depreciation for year 2.

Show solution
  1. Year 1: 10% of ₹10,90,000 = ₹1,09,000, closing WDV ₹9,81,000.
  2. Year 2: 10% of ₹9,81,000 = ₹98,100, closing WDV ₹8,82,900.

Answer: ₹98,100

Example 2 · level 2

Iyer Textiles bought a delivery van for ₹8,40,000. Depreciation is charged @ 25% p.a. on the written down value. Find the depreciation for year 3.

Show solution
  1. Year 1: 25% of ₹8,40,000 = ₹2,10,000, closing WDV ₹6,30,000.
  2. Year 2: 25% of ₹6,30,000 = ₹1,57,500, closing WDV ₹4,72,500.
  3. Year 3: 25% of ₹4,72,500 = ₹1,18,125, closing WDV ₹3,54,375.

Answer: ₹1,18,125

Example 3 · level 3

Sharma Traders bought a delivery van for ₹14,85,000. Depreciation is charged @ 20% p.a. on the written down value. Find the depreciation for year 4.

Show solution
  1. Year 1: 20% of ₹14,85,000 = ₹2,97,000, closing WDV ₹11,88,000.
  2. Year 2: 20% of ₹11,88,000 = ₹2,37,600, closing WDV ₹9,50,400.
  3. Year 3: 20% of ₹9,50,400 = ₹1,90,080, closing WDV ₹7,60,320.
  4. Year 4: 20% of ₹7,60,320 = ₹1,52,064, closing WDV ₹6,08,256.

Answer: ₹1,52,064

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