Distinguish Between Straight Line And Written Down Method Of Providing Depreciation
Amount of Depreciation: The amount of depreciation remains the same all the years under straight-line method, while it goes on decreasing every year under the written down value method. Computation of Depreciation: Under straight line method of depreciation, depreciation is charged on the original cost of the asset, while it is charged on the reducing balance every year under written down value method. Value of Asset: Under the straight line method the value of the asset become nil at the end of its working life but it never becomes nil under the written down value method. Rate of Depreciation: Normally, the rate of depreciation is lower under straight-line method whereas it is higher under the diminishing balance method. Recognition: The straight line method of depreciation is not recognized by the income tax authorities while the later method is well recognized by them.
