changes and require more repair expenses with passage of time such as plant

changes and require more repair expenses with passage of time such as plant and machinery, vehicles, etc. Basis of Difference Straight Line Method Written Down Value Method . Basis of charging depre- Original cost Book Value (i.e. original ciation cost less depreciation charged till date) . Annual depreciation charge Fixed (Constant) year Declines year after year . Total charge against Unequal year after year. Almost equal every year. profit and loss account in It increases in later years. respect of depreciation and repairs . Recognition by income Not recognised Recognised tax law . Suitablity It is suitable for assets in It is suitable for assets, which repair charges are which are affected by less, the possibility of technological changes and obsolescence is low and require more repair scrap value depends upon expenses with passage of the time period involved. time. Fig. . : Comparison of straight line and written down value method Test Your Understanding - III There are two dentists Dr. Aggarwal and Dr. Mehta in your locality who are competitors. Both of them have recently bought an equipment for treatment of patients. Dr. Aggarwal has decided to write-off an equal amount of depreciation every year while Dr. Mehta wants to write-off a larger amount in earlier years. They do not know anything about the methods of depreciation. Who is wise in your opinion? Give reasons in support of your answer.