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Depreciation: SLM and WDV Methods, ISC Class 11

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AccountsISC Class 11 · Depreciation

Depreciation: Straight Line and Written Down Value (ISC Class 11 Accounts)

Updated 17 October 2026 · Fact-checked

Depreciation is the decrease in the value of a fixed asset because of use, passage of time, obsolescence or accident, charged as an expense. In the straight line method the same amount is charged every year: (Cost - Scrap value) / Life. In the written down value method a fixed percentage is charged on the reducing balance, so the charge falls every year.

Understand Depreciation: Meaning, Straight Line and Written Down Value Methods

Meaning and causes. Depreciation is the permanent, gradual fall in the book value of a fixed asset. Causes: wear and tear, passage of time, obsolescence, expiry of legal rights (lease, patent), exhaustion (mines) and accidents.

Objectives. To find the true profit by charging the cost of using the asset to the years that benefit, to show the asset at a fair book value, to retain funds for replacement, and to meet tax rules. It is a non-cash expense: funds stay in the business.

Cost of the asset = purchase price + freight + installation and other costs to put it to use.

Straight line method (SLM / fixed instalment). Annual depreciation = (Cost - Estimated scrap value) / Estimated life. Rate on cost = Depreciation / Cost x 100. The book value falls in a straight line. Simple, but ignores higher repair costs in later years.

Written down value method (WDV / diminishing balance). Depreciation each year = Rate x Opening book value. Higher charge in early years, lower later; the book value never reaches zero. Depreciation plus repairs stays near level over the years.

Part-year. If an asset is bought during the year, depreciation is for the period of use (months/12). Additions are depreciated from the date of purchase, sales up to the date of sale.

Comparison. SLM: equal charge, rate on original cost, book value reaches scrap. WDV: reducing charge, rate on book value, book value never zero; not suitable for assets with fixed life like a lease.

Rate found from SLM. If the cost is Rs 2,00,000, scrap Rs 20,000, life 5 years: depreciation Rs 36,000; rate = 18% of cost.

Depreciation: Meaning, Straight Line and Written Down Value Methods: key facts

SLM depreciation
Depreciation = (Cost - Scrap value) / Life in years | Rate on cost = Depreciation / Cost x 100
Same amount every year.
WDV depreciation
Depreciation = Rate x Opening book value | Book value = Cost - Total depreciation
Charge reduces yearly.
Part-year charge
Depreciation for part year = Annual charge x Months used / 12 | Add from date of purchase
For additions.

How to answer Depreciation: Meaning, Straight Line and Written Down Value Methods questions

Identify the method, the cost and the period before calculating.

  1. 1Find the cost (include installation).
  2. 2For SLM compute (cost - scrap)/life; for WDV apply the rate to each opening book value.
  3. 3Adjust for part-year if given.
  4. 4Make a year-wise table with opening book value, depreciation, closing book value.

Depreciation: Meaning, Straight Line and Written Down Value Methods in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Equal and reducing charge

Suppose a bakery buys an oven for Rs 1,20,000 and expects to scrap it after 4 years for Rs 20,000.

Find the yearly SLM charge and the WDV charge in year 1 at 25%.

Try it first, then show the solutionSolution
  1. SLM = (1,20,000 - 20,000) / 4 = 25,000.
  2. WDV year 1 = 25% of 1,20,000 = 30,000.

Answer: SLM Rs 25,000 every year; WDV Rs 30,000 in year 1, falling after.

Memory hook: SLM is steady; WDV starts high.

Tricks to remember Depreciation: Meaning, Straight Line and Written Down Value Methods

Short memory aids. Say each one aloud once, then use it on a question the same day.

  • SLM = cost less scrap over life

    (C - S) / N.

    Use it when: SLM.

  • WDV on what is left

    Rate times the balance at the start of the year.

    Use it when: WDV.

  • Non-cash

    Depreciation uses no cash; it only lowers profit.

    Use it when: Concept.

Depreciation: Meaning, Straight Line and Written Down Value Methods: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: SLM charge · 1 mark · MCQBoard level

A machine costs Rs 1,00,000, scrap value Rs 10,000, life 5 years. Annual depreciation under SLM is:
(a) Rs 20,000 (b) Rs 18,000 (c) Rs 22,000 (d) Rs 10,000

Try it first, then show the solutionSolution
  1. (1,00,000 - 10,000) / 5 = 18,000.

Answer: (b) Rs 18,000

Example 2: Causes · 4 marks · Short answerBoard level

State four causes of depreciation with an example of each. (4 marks)

Try it first, then show the solutionSolution
  1. Wear and tear: machinery.
  2. Passage of time: building.
  3. Obsolescence: computer.
  4. Expiry of legal rights: lease.

Answer: Wear and tear (machine), passage of time (building), obsolescence (old computer model), expiry of legal rights (lease or patent).

Example 3: WDV table · 7 marks · Long answerHarder board level

A machine costing Rs 2,00,000 is depreciated at 20% p.a. by the WDV method. Prepare the table for 3 years and find the book value at the end of year 3. Then find the SLM depreciation if the scrap value is Rs 20,000 after 5 years and compare the year 1 and year 3 charges. (7 marks)

Try it first, then show the solutionSolution
  1. WDV: year 1 = 40,000, book value 1,60,000; year 2 = 32,000, book value 1,28,000; year 3 = 25,600, book value 1,02,400.
  2. SLM = (2,00,000 - 20,000) / 5 = Rs 36,000 a year.
  3. Year 1: WDV 40,000 against SLM 36,000; year 3: WDV 25,600 against SLM 36,000.

Answer:

YearOpeningDepreciation 20%Closing
12,00,00040,0001,60,000
21,60,00032,0001,28,000
31,28,00025,6001,02,400

SLM charge Rs 36,000 every year; WDV is higher in year 1 and lower in year 3.

Example 4: Part-year and additions · 5 marks · Long answerHarder board level

On 1 April 2025 a firm had machinery of Rs 5,00,000. On 1 October 2025 it bought another machine for Rs 2,00,000 and paid Rs 20,000 for installation. Depreciation is 10% p.a. on cost (SLM) for the year ended 31 March 2026. Find the total depreciation. (5 marks)

Try it first, then show the solutionSolution
  1. Old machinery: 10% of 5,00,000 = 50,000.
  2. New machine cost = 2,00,000 + 20,000 = 2,20,000; for 6 months: 2,20,000 x 10/100 x 6/12 = 11,000.
  3. Total = 61,000.

Answer: Rs 61,000.

Example 5: Find the rate · 5 marks · Long answerHOTS / competency

A machine costs Rs 3,00,000. Under WDV the book value after 2 years is Rs 1,92,000. Find the rate of depreciation (assume it is a whole number) and the depreciation of year 3. (5 marks)

Try it first, then show the solutionSolution
  1. Book value after 2 years = 3,00,000 x (1 - r)^2 = 1,92,000, so (1 - r)^2 = 0.64.
  2. 1 - r = 0.8, so r = 20%.
  3. Check: year 1 = 60,000 (2,40,000); year 2 = 48,000 (1,92,000).
  4. Year 3 = 20% of 1,92,000 = Rs 38,400.

Answer: Rate 20%; year 3 depreciation Rs 38,400.

Where students lose marks in Depreciation: Meaning, Straight Line and Written Down Value Methods

The slips examiners see most often, and what to write instead.

  • Mistake: Ignoring scrap value in SLM

    Formula memory.

    Wrong working

    1,00,000 / 5 = 20,000

    Right working

    (1,00,000 - 10,000) / 5 = 18,000

    Do this: Subtract scrap first.

    Usually costs: 2 marks.

  • Mistake: WDV applied on cost every year

    Mixing with SLM.

    Wrong working

    20% of 2,00,000 each year

    Right working

    20% of opening book value

    Do this: Use the reducing balance.

    Usually costs: 2-3 marks.

  • Mistake: Full year charge on an addition

    Skipping months.

    Wrong working

    10% of 2,20,000 = 22,000

    Right working

    22,000 x 6/12 = 11,000

    Do this: Use months of use.

    Usually costs: 2 marks.

Exam tips

  • Show a year-wise table for WDV.
  • Mention installation in the cost.
  • State that depreciation is a non-cash expense.

Practice questions on Depreciation: Meaning, Straight Line and Written Down Value Methods

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

  1. Q1 · 1 mark · MCQBoard level

    Under the WDV method, depreciation in successive years:
    (a) rises (b) stays equal (c) falls (d) is zero

    Hint

    Reducing balance.

    Answer

    (c) falls

  2. Q2 · 3 marks · Short answerBoard level

    A machine will need heavier repairs as it ages. Which method of depreciation gives a more even total of depreciation plus repairs over its life, and why? (3 marks)

    Hint

    Falling charge against rising repairs.

    Answer

    The WDV method: its depreciation is high in the early years when repairs are low and falls later when repairs are high, so the combined yearly charge stays more even than with SLM.

  3. Q3 · 5 marks · Long answerHarder board level

    A machine bought for Rs 4,50,000 with installation Rs 30,000 has a life of 8 years and scrap value Rs 30,000. Find SLM depreciation and the rate on cost. If instead WDV at 15% is used, find the book value after 2 years. (5 marks)

    Hint

    Cost = 4,80,000.

    Answer

    SLM = (4,80,000 - 30,000) / 8 = 56,250; rate = 56,250 / 4,80,000 x 100 = 11.72%. WDV: year 1 = 72,000 (4,08,000); year 2 = 61,200 (3,46,800).

  4. Q4 · 5 marks · Long answerHarder board level

    A firm bought a computer on 1 July 2025 for Rs 60,000 and another on 1 January 2026 for Rs 40,000. Depreciation is 30% p.a. by WDV (year ends 31 March 2026). Find the charge for 2025-26 and the book values on 31 March 2026. (5 marks)

    Hint

    9 months and 3 months.

    Answer

    First: 60,000 x 30/100 x 9/12 = 13,500, book value 46,500. Second: 40,000 x 30/100 x 3/12 = 3,000, book value 37,000. Total depreciation Rs 16,500; total book value Rs 83,500.

  5. Q5 · 3 marks · Short answerHOTS / competency

    A shop owner thinks depreciation builds a cash fund automatically. Evaluate, with a machine depreciated Rs 25,000 a year. (3 marks)

    Hint

    Non-cash.

    Answer

    Depreciation is only an accounting charge: no cash moves. Profit falls by 25,000 and, as that amount is not paid out, cash stays in the business only if a separate investment or fund is made; otherwise it is spent in the business.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

  1. 1.SLM formula?Show answer

    (Cost - Scrap) / Life.

  2. 2.WDV applied to?Show answer

    Opening book value.

  3. 3.Is depreciation cash?Show answer

    No, non-cash.

  4. 4.Name a cause of depreciation.Show answer

    Wear and tear.

  5. 5.Does WDV reach zero?Show answer

    No.

Depreciation: Meaning, Straight Line and Written Down Value Methods: frequently asked questions

Is land depreciated?

Normally not.

Does depreciation affect cash?

No.

Is repair a depreciation?

No.

Which method gives lower early profit?

WDV.