In the previous post I wrote about some basic info about depreciation and I suggest to read the post before you proceed. In this post I am going to discus about the method of depreciation.

Although there are a few method of depreciation, but out of them two main method of depreciation are "Straight line" method (also known as "fixed installment" method) and "Diminishing" method" (also known as "Reducing" method).

To find out the amount of depreciation and written down value, the formula will be as follow:

value of a motor vehicle depreciating @10% P.A., which was purchased at Rs. 2,00,000/-. Here, at the end of first year, the book value of asset will be Rs. 1,80,000/-

To find out the amount of depreciation and written down value, the formula will be as follow:

Although there are a few method of depreciation, but out of them two main method of depreciation are "Straight line" method (also known as "fixed installment" method) and "Diminishing" method" (also known as "Reducing" method).

**Straight line method:**It is the easiest method of depreciation.**In this method, assets will depreciates in equal annual value for each year. For example, value of a motor vehicle depreciating Rs. 3000/- for each year, which was purchased at Rs. 2,00,000/-. Here, at the end of first year, the book value of asset will be Rs. 1,97,000/-***(2,00,000-3000).*At the end of second year, it will be Rs. 1,94,000/-*(1,97,000-3000).*At the end of third year, the value will be Rs. 1,91,000/-*(1,94,000-3000)*and so on...To find out the amount of depreciation and written down value, the formula will be as follow:

and

*Where,**WDV= Written down value or simply the value of depreciation**D = Depreciation of the asset**x = The cost price of the asset.**s = Scrap value of the asset**, what will be left at the disposal. Scrap value is the value of junk, hence can not be depreciated any more.**t = estimated life span**of the asset (generally in year).**Y= Completed year.***Diminishing**

**method:**Unlike straight line method it is more complex and scientific method of depreciation. In this method the value of asset will decrease gradually year after year. For example,

*(2,00,000*90%).*At the end of second year, it will be Rs. 1,62,000/-*(1,80,000*90%).*At the end of third year, the value will be Rs. 1,45,800/-*(1,62,000*90%)*and so on...To find out the amount of depreciation and written down value, the formula will be as follow:

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and

*Where,**WDV= Written down value or simply the value of depreciation**D = Depreciation of the asset**x = The cost price of the asset after deducting scrap value (if any).**r= Rate of depreciation (%)**t = Number of**Completed year.*