Question : Basaria Confectioner bought a cold storage plant on July 1, 2003 for Rs $1, 00, 000$ .
Compare the amount of depreciation charged for first three years using
1. Rate of depreciation @ $10 %$ on original cost basis.
2. Rate of depreciation @ $10 %$ on written down value basis.
3. Also, plot the computed amount of depreciation on a graph.

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Solution

Answer : Statement showing comparison of depreciation with two different methods of depreciation.
Year Depreciation @ $10 %$ Straight Line Method Depreciation @ $10 %$ Written Down Value Method Difference in the Amount of Depreciation Remarks
First Year $10, 000$ $10, 000$ Nil In first year, there is no difference. Depreciation is same in both the method.
Second Year $10, 000$ $9, 000$ $1, 000$ There is difference of Rs $1, 000$ in depreciation with written down value method.
Third Year $10, 000$ $8, 100$ $1, 900$ There is difference of Rs. $1, 000$ in depreciation with written down value method
Total $30, 000$ $27, 100$ $2, 900$ Total difference in three years is Rs $2, 900$

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Year	Depreciation @ $10 %$ Straight Line Method	Depreciation @ $10 %$ Written Down Value Method	Difference in the Amount of Depreciation	Remarks
First Year	$10, 000$	$10, 000$	Nil	In first year, there is no difference. Depreciation is same in both the method.
Second Year	$10, 000$	$9, 000$	$1, 000$	There is difference of Rs $1, 000$ in depreciation with written down value method.
Third Year	$10, 000$	$8, 100$	$1, 900$	There is difference of Rs. $1, 000$ in depreciation with written down value method
Total	$30, 000$	$27, 100$	$2, 900$	Total difference in three years is Rs $2, 900$