Different between the straight line method and written down value method of depreciation.?

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Different between the straight line method and written down value method of depreciation.?

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Key Differences Between SLM and WDV

The difference between SLM and WDV are explained in the given below points in detail:

1. SLM is a method of depreciation in which the cost of the asset is spread uniformly over the life years by writing off a fixed amount every year. WDV is a method of depreciation in which a fixed rate of depreciation is charged on the book value of the asset, over its useful life.

2. In straight-line method, depreciation is calculated on the original cost. On the other hand, in the written down value method, the calculation of depreciation is on the basis of written down value of the asset.

3. The annual depreciation charge in SLM remains fixed during the life of the asset. In contrast, the amount of depreciation in WDV method diminishes every year.

4. In straight line method, the book value of the asset is completely written off i.e. the asset value is reduced to zero or its salvage value. Conversely, the asset’s book value is not completely written off in written down value method.

5. If a firm is using SLM method, then the amount of depreciation is initially lower while if the method of depreciation is WDV then in the beginning the amount of depreciation is higher.

6. The SLM method is best for the fixed assets with negligible repairs and maintenance like leases. On the contrary, WDV method is appropriate for the fixed assets whose repairs increase, as they get older like machinery, vehicles, etc.

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