Question

Features of written down value method of depreciation

Answer 1

Explanation:

1. 1This method is simple to understand and easy to operate. A separate calculation need not be made in respect of every addition to the main asset.
2. The amount of annual depreciation reduces with the reducing balance of the asset.
3. The amount of depreciation is higher in the earlier years when the machine is efficient and the cost of repairs is low. In later years amount of depreciation becomes lower and the amount of repairs increase due to extended use and wear & tear of the Asset. Thus the total charge for depreciation and repairs together remains more or less uniform over the years. This helps in eliminating huge variations in annual profits or losses.
4. This method takes care of the obsolescence problem related to the assets as the major part of depreciation is charged in the earlier years. Due to this feature replacement of the assets before the end of its estimated useful life becomes easy and feasible.
5. This method is recognised by tax authorities and other legal bodies.