Creating an Double Declining Balance Depreciation Schedule in Excel
The Double Declining Balance method provides an accelerated depreciation schedule.
Calculation of this method is quite interesting. For example You are buying something for $5000, it has life of 5 years and after that time it would be worth of $500.
If you calculate this in Straight Line Depreciation method then the asset’s annual depreciation will be 20% of the asset’s cost – salvage, i.e. ($5000-$500)*20%=$900.
But with Double Declining Balance Depreciation method first year’s would be $5000*(20%)*2(for double)=$2000.
The following table will help you understand how Double Declining Balance Depreciation Schedule is calculated.
Double Declining Balance Depreciation Schedule
| Period | Calculation | Result |
|---|---|---|
| Total | $4,500.00 | |
| First Year | 5000X40% | $2,000.00 |
| Second Year | 3000X40% | $1,200.00 |
| Third Year | 1800X40% | $720.00 |
| Fourth Year | 1080X40% | $432.00 |
| Fifth Year | Rest of the value | $148.00 |
- Cost: Cost of the asset.
- Salvage: Asset’s value after its life.
- Life: Lifetime of asset.
- Period:(optional) The period you want the value.
- Factor: How the depreciation is to be calculated. You can set it 1.5 or anything else, if left blank 2 is default value.
Now Make a Excel sheet with this fields and enter =DDB(cost, salvage, life, period, [factor]) in your desire field and you have your result.
Question,
With DDB depreciation, how do I adjust for the first year if it is a parcial year. For example, if it starts in may vs january (not a full twelve months)?
First of all you asked a great question. Basically if your depreciation starts form May your year will count from May to April. but if you want to convert this from January to December then you have to calculate the depreciation for first 8 month of the first year. Here is the formula to calculate the first and last year double depreciation value of an asset if the first year is not a full 12 months calender year.
First Year Depreciation Rate = M/12 x Depreciation Rate
Last Year Depreciation Rate = (12-M)/12 x Depreciation Rate
So if we calculate it here it will be like 8/12*40 = 26.67% of asset value i.e $1,333.33 for the first year and same for last year.