What is Straight Line Method of Depreciation and the Written Down Value (WDV) Method of Depreciation

The Straight Line Method of Depreciation and the Written Down Value (WDV) Method of Depreciation are two commonly used methods for calculating the depreciation of an asset.

The Straight Line Method of Depreciation is a method of calculating depreciation where the same amount of depreciation is taken each year over the useful life of the asset. This method is simple to calculate and is easy to understand. Under this method, the cost of the asset is divided by the number of years in its useful life, giving the annual depreciation expense.

The Written Down Value (WDV) Method of Depreciation is a method of calculating depreciation where the value of the asset decreases at a faster rate in the initial years and then slows down in the later years. Under this method, a higher percentage of depreciation is taken in the initial years, and the percentage of depreciation decreases as the asset ages.

Here is a table outlining the key differences between the two methods:

	Straight Line Method	Written Down Value Method
Calculation	Cost of the asset / useful life of the asset	Depreciation rate x Written Down Value of the asset
Depreciation expense	Same amount each year	Increases in the initial years and decreases in later years
Impact on book value	Decreases linearly	Decreases at a faster rate in the initial years and slows down in later years
Simplicity of calculation	Simple	Complex

In conclusion, both methods have their own advantages and disadvantages and the choice between the two methods depends on the specific needs of the business and the type of asset being depreciated. The Straight Line Method is simpler and easier to understand, whereas the WDV Method provides a more accurate representation of the asset's value over time.