This Double Declining Balance Depreciation Excel Template will use the double-declining method to calculate the depreciation expense. The Double Declining Balance Depreciation Method is one of the most commonly used depreciation methods to calculate depreciation expense. This method is frequently used in determining the depreciation for fixed assets with heavier weight in the early years, which provides tax advantages for the company at the beginning of the period. This is achieved through an initial higher depreciation expense than the straight line depreciation expense. The higher depreciation expense, the lower the profit before tax and consequently taxes payable.
Calculate Accelerated Depreciation ExpenseTo calculate the depreciation expense through this method you need the following inputs: Beginning Book Value, Useful life, and Salvage Value. Below is a quick summary of steps to calculating the depreciation:
- Identify the beginning book value, useful life, and salvage value of the asset.
- Subtract salvage value from the beginning book value to find the total depreciable amount for the life of the asset.
- Compute the annual depreciation rate by dividing 100% by the number of useful years.
- Multiply the beginning book value by two times the regular annual rate.
- Deduce the annual depreciation expense from the beginning book value to determine the ending period value.
- Repeat the above steps until arriving at the salvage value of the asset.
More Resource on Double Declining Balance DepreciationRead CFI's complete guide on depreciation methods to learn about the most common types of depreciation methods and compare their differences!