Advantages and Disadvantages of Written Down Value Method
Written down value method of depreciation is a method under which rate of depreciation is fixed but it is charged on written down value of asset and therefore under this method value of asset will never be zero. Here is the list of advantages and disadvantages of written down value method of depreciation –
1. Since under this method higher depreciation is charged in early years it takes into account that asset is more efficient in early years and therefore it is more realistic way of depreciation.
2. Since in early years machines requires less repairs and as the year passes by repair cost began to rise, therefore this method by charging more depreciation in early years and less in later years make sure that total cost of repairs and depreciation is same every year.
1. Since the rate of depreciation is fixed by not following formula chances of subjectivity in fixing rate of depreciation becomes high.
2. The value of asset will never be zero in books of account under this even if asset is of no use to company.