Diminishing Balance Method or Written Down Value Method

Under this method, depreciation is charged at a fixed rate every year but on

reducing balance i.e., on balance reduced each year during the economic life of

the asset by the amount of depreciation till the asset is reduced to its scrap

value.

For example, if the cost of the asset is Rs. 1,000 the rate of depreciation

is 10 % on Rs. 1,000 i.e., Rs. 100, in the second year, it will be 10 % on Rs

900 i.e., Rs. 90 is the third year, it will be 10 % on Rs 810 (900-90) i.e., Rs.

81 and so on.