Accounts • Class 11 & 12 Commerce
Depreciation Methods Compared: SLM vs WDV. When to Use Which and Why Examiners Care
Depreciation questions look simple on the surface, apply a rate, get a number, done. But examiners aren't just checking your arithmetic, they're checking whether you understand why an asset loses value the way it does. Get the concept right, and SLM vs WDV stops being confusing and starts being one of the easiest scoring areas in Accounts.
What Depreciation Actually Represents
Depreciation isn't just an accounting formality, it's the accounting way of recognising that assets like machinery or vehicles lose value over time due to use, wear, or obsolescence. The method you use to calculate this should reflect how that specific asset actually loses value, which is exactly why examiners test your understanding of the difference, not just your calculation speed.
SLM: Straight Line Method
📏 Straight Line Method (SLM)
Charges an equal amount of depreciation every year over the asset's useful life. The value declines in a straight line, hence the name.
📉 Written Down Value Method (WDV)
Charges a fixed percentage on the asset's reducing book value each year, so depreciation is higher in early years and lower later.
Formula (SLM): (Original Cost − Scrap Value) ÷ Useful Life
For example, a machine bought for ₹1,00,000 with a scrap value of ₹10,000 and a useful life of 9 years would have annual depreciation of (1,00,000 − 10,000) ÷ 9, the same amount charged every single year until scrap value is reached.
WDV: Written Down Value Method
Formula (WDV): Book Value at the start of the year × Rate of Depreciation
Using a 10-year-old machine bought for ₹1,00,000 at a 10% WDV rate: Year 1 depreciation is ₹10,000 (10% of ₹1,00,000), but Year 2 depreciation is only ₹9,000 (10% of the reduced ₹90,000 book value), and so on. The amount shrinks every year because it's applied to a shrinking base.
SLM vs WDV: Quick Comparison
| Basis | SLM | WDV |
|---|---|---|
| Depreciation amount | Same every year | Higher in early years, lower later |
| Applied on | Original cost (minus scrap) | Reducing book value |
| Book value at end of life | Reaches scrap value exactly | Never technically reaches zero |
Common Errors Students Make
- Forgetting scrap value in SLM, and dividing the full original cost by useful life instead of (Cost − Scrap Value).
- Reapplying the WDV rate on original cost every year instead of the previous year's closing book value.
- Mixing up which method matches which asset when asked to justify a choice, rather than actually reasoning through the usage pattern.
- SLM charges equal depreciation yearly, based on (Cost − Scrap Value) ÷ Useful Life.
- WDV charges a fixed rate on the reducing book value, giving higher depreciation early on.
- SLM suits evenly-wearing assets like furniture and buildings. WDV suits fast-depreciating assets like vehicles and machinery.
- Always apply the WDV rate on the previous year's book value, never the original cost.
- When asked to justify a method, mention the asset's usage pattern, not just the calculation.
Conclusion
SLM and WDV aren't just two formulas to memorise, they represent two different ways assets actually lose value in the real world. Understand that connection, apply the correct base each year, and justify your method with the asset's usage pattern, and depreciation questions become one of the more predictable, scorable parts of your Accounts paper.
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