The diminishing method of depreciation provides more depreciation in the initial years. Diminishing Balance MethodAccording to the Diminishing Balance Method, depreciation is charged at a fixed percentage on the book value of the asset. As the book value reduces every year, it is also known as the Reducing Balance Method or Written-down Value Method. Since the book value reduces every year, hence the amount of depreciation also reduces every year. Under this method, the value of the asset never reduces to zero. This method is based on the assumption that in the earlier years the cost of repairs to the assets is low and hence more amount of depreciation should be charged. Also, in the later years, the cost of repairs will increase and therefore less amount of depreciation shall be provided. Hence, this method results in an equal burden on the profit every year during the life of the asset. Additional InformationDepreciation can be defined as a continuing, permanent, and gradual decrease in the book value of fixed assets. This type of shrinkage is based on the cost of assets utilized in a firm and not on its market value. Methods of Calculating Depreciation 1. Straight Line Method (SLM)?Under the depreciation Straight Line Method, a fixed depreciation amount is charged annually, during the lifetime of an asset. The amount of annual depreciation is computed on the Original Cost, and it remains fixed from year to year. This method is also known as the Original Cost method or Fixed Instalment method. 2. Written Down Value Method (WDV)?Under the Written Down Value method, depreciation is charged on the book value (cost “depreciation) of the asset every year. Under the WDV method, book value keeps on reducing so, annual depreciation also keeps on decreasing. This method is also known as the Diminishing Balance Method or Reducing Instalment Method.