Declining Balance Method Depreciation Calculator

Declining Balance Depreciation Schedule

Example - Cost: $575,000.00, Salvage: $5,000.00, Life: 10 years , First Year: 12 months, Factor: 1.5

Year	Book Value Year Start	Depreciation Percent	Depreciation Expense	Accumulated Depreciation	Book Value Year End
1	$575,000	15.00%	$86,250	$86,250	$488,750
2	$488,750	15.00%	$73,313	$159,563	$415,438
3	$415,438	15.00%	$62,316	$221,878	$353,122
4	$353,122	15.00%	$52,968	$274,846	$300,154
5	$300,154	15.00%	$45,023	$319,869	$255,131
6	$255,131	15.00%	$38,270	$358,139	$216,861
7	$216,861	15.00%	$32,529	$390,668	$184,332
8	$184,332	15.00%	$27,650	$418,318	$156,682
9	$156,682	15.00%	$23,502	$441,820	$133,180
10	$133,180	15.00%	$19,977	$461,797	$113,203

Declining Balance Depreciation Formulas

The declining balance method is an accelerated depreciation method. Using this method the Book Value at the beginning of each period is multiplied by a fixed Depreciation Rate.  200% of straight line depreciation, or 2, is most commonly called the Double Declining Balance Method.

The declining balance calculation does not consider the salvage value in the depreciation of each period however, if the book value will fall below the salvage value, the last period might be adjusted so that it ends at the salvage value.  When declining balance method does not fully depreciate an asset by the end of its life, variable declining balance method might be used instead.

1. Straight-Line Depreciation Percent = 100% / Useful Life
2. Depreciation Rate = Depreciation Factor x Straight-Line Depreciation Percent
3. Depreciation for a Period = Depreciation Rate x Book Value at Beginning of the Period
4. If the first year is not a full 12 months and is a number M months, the first and last years will be calculated
   • First Year Depreciation Rate = M/12 x Depreciation Rate
   • Last Year Depreciation Rate = (12-M)/12 x Depreciation Rate

Declining Balance Depreciation Example

Suppose you purchase an asset for your business for $575,000 and you expect it to have a life of 10 years with a final salvage value of $5,000.  You also want less than 200% of the straight-line depreciation (double-declining) at 150% or a factor of 1.5.

1. Straight-Line Depreciation Percent = 100% / 10 = 10%
2. Depreciation Rate = 1.5 x 10% = 15%
3. Depreciation for a Period = 15% x Book Value at Beginning of the Period
   • Depreciation for Period 1 = 15% x $575,000 = $86,250
   • For Periods 2 and greater, depreciation is 15% x ($575,000 - Accumulated Depreciation )
   • Depreciation for Period 2 = 15% x ($575,000 - $86,250 ) =  $73,313
   • Depreciation for Period 3 = 15% x ($575,000 - $159,563 ) = $62,316
   • Etc ....

Mid-Month, Mid-Year, Mid-Quarter Conventions

Some accounting systems allow for Mid-Month, Mid-Year or Mid-Quarter Conventions.

• For mid month convention use .5 in the input field for Months in First Year.  For example, for an asset placed in service in October you enter 2.5 to cover 1/2 of October and all of November and December.
• For mid year convention enter 6 in the input field for Months in First Year.
• For mid quarter convention enter 1.5, 4.5, 7.5 or 10.5 in the input field for Months in First Year for service starting within the 4th, 3rd, 2nd or 1st quarter respectively.  For example, putting an asset in service in October, November or December you would choose mid of the 4th quarter so you would enter 1.5 months in the first year because mid 4th quarter is mid November.

Microsoft® Excel® Functions Equivalent: DDB

The Excel equivalent function for Declining Balance Method is DDB(cost,salvage,life,period,factor). With it you can calculate depreciation for the chosen period. "factor" defaults to 2, double declining balance method, but you can change it.  To calculate depreciation by the double declining method you can use this calculator setting the factor = 2 or use our Double Declining Balance Method Depreciation Calculator.

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Residual value, salvage value and scrap value mean the same thing.  They refer to the value of an asset at the end of the useful life.