Question

under the diminishing balance method depreciation it________​

Answer 1

Answer:

Under diminishing balance method, depreciation decreases every year. Since the book value reduces every year, hence the amount of depreciation also reduces every year. Under this method, the value of the asset never reduces to zero.

Answer 2

Answer:

The Diminishing balance method (DBM) also known as Written down value method (WDV) or Reducing balance method (RBM) requires the asset to be depreciated every year on the revised Book Value (BV).

For example of an asset is purchased for Rs, 2,00,000

And it is depreciated on DBM at 10% p.a.

In AY1 it would shown in the books at original cost.

In AY2 after providing depreciation of 10% of the preceding year the BV would revise to 1,80,000 (WN1) and depreciation of AY2 would be charged on 10% of the revised figure i.e. 1,80,000.

And therefore in AY3 the BV of the asset would be 1,62,000 (WN2).

WN1 :-

2,00,000*10/100=20,000

BV of asset as on 31/03/20xx= 1,80,000.

WN2:-

1,80,000*10/100=18,000

BV of asset as on AY3 (31/03/20xx)=1,62,000.