Accelerated Method of
Depreciation
Declining Balance
Why Double Decline?
 Many plant assets depreciate more
in the early years
 Example: Ipod, Truck
 Charging more depreciation in the early
years is more accurate than charging it in
the later years
Double Declining Balance FormulaExplanation
 Multiplying the book value by a
constant depreciation rate at the
end of each fiscal period is called
declining balance of depreciation.
 The declining balance
depreciation is multiply by two
and this gives us the double
declining rate
How does the formula look like?
Estimated
depreciation
Expense
Straight line
rate of
depreciation
/
x
Years of
estimated
useful life
2
=
=
Straight line
rate of
depreciation
Double
Declining
balance
rate
Plant Asset: truck
Estimated
depreciation
Expense
/
100%
/
Straight line
rate of
depreciation
x
20%
x
Orig. Cost: $25,000
Est. Salv. Value:$2,500
Est. Useful Life: 5 yrs.
Years of
estimated
useful life
5
2
2
=
Straight line
rate of
depreciation
=
20%
=
Double
Declining
balance rate
=
40%
Calculating Depreciation Expense
Plant Asset: truck
Orig. Cost: $25,000
Est. Salv. Value:$2,500
Est. Useful Life: 5 yrs.
Year
Beginning Book
Value
Declining
Balance
Rate
Annual
Depreciation
Ending
Book Value
1
$25,000
40%
$10,000
$15,000
2
$15,000
40%
$6,000
$9,000
3
$9,000
40%
$3,600
$5,400
4
$5,400
40%
$2,160
$3,240
5
$3,240
---------
$740
$2,500