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Accounting · Depreciation and Amortisation

Written Down Value Method of Depreciation

Updated 1 October 2026

The written down value (WDV) method charges depreciation at a fixed percentage on the book value at the start of each year. Book value falls every year, so the charge falls too. Solve it by finding opening book value, applying the rate for the period, then posting the entry and the asset account.

Understand Written Down Value Method of Depreciation

Depreciation is the spreading of an asset's cost over its useful life. The WDV method, also called the reducing balance or diminishing balance method, does this with a fixed percentage applied to a changing base.

In year 1 the base is the cost. In year 2 the base is cost minus year 1 depreciation. In year 3 the base is the balance after year 2, and so on. So the charge is highest in year 1 and falls every year.

Why use it? Many assets, such as machinery and vehicles, give more benefit and lose more value in early years. Repairs usually rise as the asset ages. A falling depreciation charge plus rising repairs gives a more even total cost each year.

Under this method the asset never reaches zero by calculation. You keep a small balance at the end of its life, which is written off or compared with scrap value on disposal.

The rate is applied on the book value, not on the original cost. This is the single biggest difference from the straight line method, where the charge is the same every year.

Key rules to remember

Depreciation for a full year
Depreciation = Opening book value × Rate %
Opening book value is cost less accumulated depreciation up to the start of the year.
Book value at year end
Closing WDV = Opening WDV − Depreciation for the year
This closing figure becomes next year's opening figure.
Part-year depreciation
Depreciation = Book value × Rate % × (Months used ÷ 12)
Used for assets bought or sold during the year. Rate is always an annual rate.
Rate when scrap value is known
r = 1 − (S ÷ C)^(1/n)
C = cost, S = scrap value, n = life in years. Use it only when the question asks you to find the rate; usually the rate is given.

How to solve Written Down Value Method of Depreciation questions

Use this order for any WDV question, whether it asks for a depreciation table, an asset account or journal entries.

  1. 1Note the cost, date of purchase, annual rate, and the financial year end. Add installation and freight to cost if they are given.
  2. 2Work out the period of use in the first year. If the asset was bought mid-year, use months.
  3. 3Calculate year 1 depreciation on cost for that period.
  4. 4Subtract it to get the closing book value. Use this as the base for the next year.
  5. 5Repeat for each year. Always apply the rate to the opening book value, never to the original cost.
  6. 6Pass the journal entry: Depreciation A/c Dr. To Asset A/c (if no provision account is used).
  7. 7Transfer depreciation to Profit and Loss A/c: Profit and Loss A/c Dr. To Depreciation A/c.
  8. 8Show the asset account with opening balance, additions, depreciation and closing balance carried down.

Quickest way: Year-by-year column table

When to use it: Use it when the question asks for depreciation or book value over several years, or when you must prepare the asset account.

  1. Draw columns: Year, Opening WDV, Depreciation, Closing WDV.
  2. Fill year 1 from cost. Carry each closing figure to the next opening cell.
  3. Check each row: opening minus depreciation equals closing.
  4. Copy the depreciation column to the asset account and P&L account so figures match.
  5. Write the journal entry once and state that it repeats each year with the new amount.

Common mistakes in Written Down Value Method of Depreciation

  • Applying the rate to original cost every year.

    Students mix up WDV with the straight line method.

    Fix: Before each year, write the opening book value in the margin and compute only on that figure.

  • Ignoring months in the first year.

    The purchase date is read quickly and treated as a full year.

    Fix: Underline the purchase date and count months to the year end. Multiply by months ÷ 12.

  • Leaving out installation or freight from cost.

    Students take only the purchase price.

    Fix: Add all costs needed to bring the asset to working condition. Do not add later repairs.

  • Showing depreciation on the wrong side of the asset account.

    Depreciation is an expense, so students put it on the debit side.

    Fix: In the asset account, depreciation reduces the asset, so it goes on the credit side.

  • Forgetting to transfer depreciation to Profit and Loss A/c.

    The student stops after charging the asset account.

    Fix: Always add the closing entry. Depreciation A/c must be closed by transfer.

Worked examples

Example 1

A machine was bought on 1 April 2022 for ₹2,00,000. Depreciation is charged at 10% per annum on the WDV method. Accounts close on 31 March. Show depreciation for the first three years and the book value on 31 March 2025.

Show the solution
  1. Year ended 31 March 2023: 10% of ₹2,00,000 = ₹20,000. Closing WDV = ₹1,80,000.
  2. Year ended 31 March 2024: 10% of ₹1,80,000 = ₹18,000. Closing WDV = ₹1,62,000.
  3. Year ended 31 March 2025: 10% of ₹1,62,000 = ₹16,200. Closing WDV = ₹1,45,800.
  4. Each year the entry is Depreciation A/c Dr. To Machinery A/c, then Profit and Loss A/c Dr. To Depreciation A/c.

Answer: Depreciation is ₹20,000, ₹18,000 and ₹16,200. Book value on 31 March 2025 is ₹1,45,800.

Example 2

On 1 July 2023 a firm bought furniture for ₹80,000 and spent ₹4,000 on its installation. Depreciation is 15% per annum on the WDV method. Books close on 31 March. Find depreciation for the years ended 31 March 2024 and 31 March 2025, and the closing book value.

Show the solution
  1. Cost = ₹80,000 + ₹4,000 = ₹84,000.
  2. Period in first year: 1 July 2023 to 31 March 2024 = 9 months.
  3. Depreciation for 2023-24 = ₹84,000 × 15% × 9/12 = ₹9,450.
  4. Closing WDV on 31 March 2024 = ₹84,000 − ₹9,450 = ₹74,550.
  5. Depreciation for 2024-25 = 15% of ₹74,550 = ₹11,182.50.
  6. Closing WDV on 31 March 2025 = ₹74,550 − ₹11,182.50 = ₹63,367.50.

Answer: Depreciation is ₹9,450 for 2023-24 and ₹11,182.50 for 2024-25. Closing book value is ₹63,367.50.

Exam tips

  • Write a small table first. Even if you slip on a later step, examiners can award marks for correct method and earlier years.
  • Read the purchase date and year end twice. Part-year questions are common and cost easy marks.
  • Show the working for every year in the answer, not only the final figure.
  • When the rate is given, do not derive it. Use the formula with scrap value only when the question asks you to find the rate.

Practice questions from Depreciation and Amortisation

Written Down Value Method of Depreciation: frequently asked questions

What is the difference between straight line and written down value method?

Under the straight line method, the charge is the same each year because it is based on cost. Under the WDV method, the charge falls each year because it is based on the reducing book value. At the same rate, the year 1 charge is equal under both methods; from year 2 the WDV charge is lower than straight line. WDV gives a higher early charge only when its rate is set higher than the SLM rate.

Does the WDV method ever make book value zero?

By calculation, no. The balance keeps shrinking but never reaches zero. At disposal, the remaining book value is compared with the sale price to find profit or loss.

Is the WDV method the same as the diminishing balance method?

Yes. Written down value, reducing balance and diminishing balance are different names for the same method.

Is the WDV rate applied on cost or on book value?

It is applied on the opening book value of each year. Only in the first year does this equal the cost.