Have you ever bought a new mobile phone and tried selling it after a few months—only to realize its value has dropped drastically? 😩
That’s depreciation in real life—and guess what? It works the same in accounting too!
In this video, we take that simple idea and explain depreciation in a way that makes complete sense, even if you’re not a number nerd. From why businesses depreciate assets, to how it’s calculated using Straight Line Method (SLM) and Written Down Value (WDV) method, we’ve covered everything with relatable examples and exam-level questions.
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If you’re preparing for JAIIB, CAIIB, or any banking/finance-related exam, this session will clear your doubts and help you score those crucial marks. Plus, we’ve broken down complex terms into plain English (and Hindi!) so it’s easier to retain and apply.
So grab a notebook, hit play, and don’t forget to leave a 👍 and comment below with your thoughts or doubts—we reply to each one!
📺 Watch Now
👉 Before we dive in, watch this video for a complete breakdown:
⏱️ Timestamps-Based Breakdown & Key Concepts
⏰ 00:00 – Mobile Example: What is Depreciation?
We kick off with a super relatable example: buying a ₹30,000 mobile and reselling it for ₹20,000.
Why the drop? It’s due to wear and tear, usage, and obsolescence—just like how companies face asset depreciation.
Key takeaway: Depreciation is the reduction in the value of a fixed asset over time due to usage, time, and market trends.
⏰ 00:43 – Real Business Application
Just like your phone lost value, the machines, tools, and equipment used by businesses lose value too! That value drop must be recorded systematically in the books of accounts.
⏰ 02:00 – Definition of Depreciation
- Depreciation = Reduction in asset value over time
- It’s a non-cash expense—no money goes out, but it reduces reported profits.
⏰ 04:08 – Causes of Depreciation
- ✅ Wear & tear
- 🕒 Passage of time
- ❌ Obsolescence (like CRT monitors!)
- 💥 Accidents
- 📉 Fall in market value
⏰ 06:00 – Need for Charging Depreciation
- Helps in matching income with expenses
- Reflects fair asset value in financial statements
- Prepares for asset replacement
- Land is not depreciated
⏰ 07:00 – Factors Affecting Depreciation
- Historical cost 🧾 (Purchase + Installation + Duties)
- Residual/Salvage value 💰
- Useful life ⏳
- Legal rules 📜
⏰ 09:47 – Depreciation Methods Overview
Common Methods:
- SLM – Straight Line Method
- WDV – Written Down Value
- Double Declining Balance
- Sum of Years’ Digits
📘 Straight Line Method (SLM) Explained
⏰ 10:52 – SLM Basics with Full Example
Machine Cost: ₹1,00,000
Scrap Value: ₹10,000
Life: 10 years
Annual Depreciation = ₹9,000
⏰ 15:01 – Book Value Calculations
Depreciation till 4th year = ₹36,000
Book value after 5 years = ₹55,000
For partial years: Use ratio like 7/12 of annual depreciation
🧮 Real-Time Numerical Case Study
⏰ 20:04 – Advanced SLM Example
Asset Cost + Costs = ₹4L
Scrap Value = ₹50,000
Depreciable Amount = ₹3.5L
Annual Depreciation = ₹35,000
After 4 years = ₹1.4L total depreciation
📉 Written Down Value Method (WDV) Explained
⏰ 28:53 – WDV Basics with Example
- Year 1: ₹10,000 (on ₹1L)
- Year 2: ₹9,000 (on ₹90K)
- Year 3: ₹8,100 (on ₹81K)
💡 Depreciation reduces every year in WDV!
⏰ 34:23 – Fast Calculation Hack
Use shortcut:
Remaining Value = Asset × 0.8 × 0.8 × 0.8
Result = ₹1,02,400 (after 3 years from ₹2L)
⏰ 36:28 – Accumulated Depreciation in WDV
Add up annual depreciation for total depreciation at any point.
📝 Download PDF Notes (Free)
📥 Click below to download the full PDF notes with formulas & examples:
👉 Download Depreciation Notes PDF
Conclusion: Key Takeaways
Understanding depreciation isn’t just for accounting pros—it’s crucial for any banking aspirant aiming to crack JAIIB, CAIIB, or promotion exams.
Quick Recap:
- Depreciation reduces asset value yearly
- SLM: Fixed depreciation yearly
- WDV: Reduces every year
- Use shortcut formulas to save exam time!
💬 Tell us: Which method do you find easier—SLM or WDV?
Drop your answer in the comments or WhatsApp us at 83609-4207 with “Saved for JAIIB”.
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