Question
If the cost of machinery is Rs.5 lakh, the life of the
machinery is expected to be 5 years, and rate of depreciation is 10%, what will be the difference between the amount of depreciation in straight line method and written down value method in first year?Solution
The depreciation in Year 1 as per: Straight Line method (SLM) = cost of machinery/life of machinery = 500000/5 = Rs.100000 per year Written down Value (WDV) = cost of machinery*rate of depreciation = 500000*10% = Rs.50,000 per year So the difference between the 2 methods = 100,000-50,000 = Rs.50,000
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