Question

State with reasons whether following statements are True or False:
There exists difference between the Written Down Value Method and Diminishing Balance Method of depreciation.

Answer 1

This statement is false. Written down value method is also known as Diminishing Balance method. In this method, depreciation is calculated at a fixed percentage on the original cost in the first year. However, in the subsequent years, depreciation is calculated at the same fixed percentage, not on the original cost but on the written down values gradually reducing during the expected working life of the asset due to charge of depreciation.