What is written down Method and its advantages?

Under this method, depreciation is charged on the book value of the asset. Since book value keeps on reducing by the annual charge of depreciation, it is also known as reducing balance method. This method involves the application of a pre-determined proportion/percentage of the book value of the asset at the beginning of every accounting period, so that the amount of depreciation reduces year after year.

Advantages of Written Down Value Method

• This method is based on a more realistic assumption that the benefits from assets do on diminishing with the passage of time.
• It results into almost equal burden on profit or loss account of depreciation and repair expenses taken together every year.
• Income Tax Act accepts this method for tax purpose.
• As a large portion of cost is written-off in earlier years, loss due to obsolescence gets reduced.
• This method is suitable for fixed assets, which lasts for long and which require increased repair and maintenance expenses with passage of time.