Difference Between SLM and WDV Method of Depreciation

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.

1. Which is better SLM or Wdv?
2. What is SLM in depreciation?
3. Which depreciation method is best?
4. How is Wdv depreciation calculated?
5. What are the 3 methods of depreciation?
6. What is original cost method?
7. How is depreciation calculated in SLM?
8. What are the main causes of depreciation?
9. What is meant by depreciation?
10. What is depreciation example?
11. Can I change depreciation methods?
12. Can you depreciate an asset not in use?

Which is better SLM or Wdv?

SLM is preferred to be applied to fixed assets whose utility is equally spread across the years of its useful life. ... WDV is preferred to be applied for fixed assets that have a higher degree of wear and tear or obsolescence i.e.: whose benefits are higher in the initial years than in subsequent years.

What is SLM in depreciation?

According to the Straight line method, the cost of the asset is written off equally during its useful life. Therefore, an equal amount of depreciation is charged every year throughout the useful life of an asset.

Which depreciation method is best?

Straight-Line Method: This is the most commonly used method for calculating depreciation. In order to calculate the value, the difference between the asset's cost and the expected salvage value is divided by the total number of years a company expects to use it.

How is Wdv depreciation calculated?

8,100 ( 10% of rs. 81,000 [90,000 – 9,000]). This method is also called reducing balance method. In the WDV method, the amount of depreciation goes on decreasing with time.
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Straight Line Method (SLM)

What are the 3 methods of depreciation?

Accountants must adhere to generally accepted accounting principles (GAAP) for depreciation. There are four methods for depreciation: straight line, declining balance, sum-of-the-years' digits, and units of production.

What is original cost method?

Straight line depreciation method or original cost method is the simplest and most commonly used depreciation method. Under this method, the difference between the original cost of an asset and its estimated scrap value is calculated and then divided by the number of years in its estimated life.

How is depreciation calculated in SLM?

The straight line depreciation for the machine would be calculated as follows:

1. Cost of the asset: $100,000.
2. Cost of the asset – Estimated salvage value: $100,000 – $20,000 = $80,000 total depreciable cost.
3. Useful life of the asset: 5 years.
4. Divide step (2) by step (3): $80,000 / 5 years = $16,000 annual depreciation amount.

What are the main causes of depreciation?

The causes of depreciation are:

• Wear and tear. Any asset will gradually break down over a certain usage period, as parts wear out and need to be replaced. ...
• Perishability. Some assets have an extremely short life span. ...
• Usage rights. ...
• Natural resource usage. ...
• Inefficiency/obsolescence.

What is meant by depreciation?

Definition: The monetary value of an asset decreases over time due to use, wear and tear or obsolescence. This decrease is measured as depreciation. ... Opposite of depreciation is appreciation which is increase in the value of an asset over a period of time.

What is depreciation example?

In accounting terms, depreciation is defined as the reduction of recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery etc..

Can I change depreciation methods?

A company may decide to change the depreciation method it applies to a fixed asset. For example, if an asset loses much of its value early on, a company might switch from straight-line to accelerated depreciation.

Can you depreciate an asset not in use?

What can't you depreciate? As discussed in the Quick Summary, you can't depreciate property for personal use, inventory, or assets held for investment purposes. You can't depreciate assets that don't lose their value over time – or that you're not currently making use of to produce income.