The book value at the end of 5 years of depreciation is denoted BV 5. However, for some methods like declining-balance depreciation or the accelerated cost recovery system (ACRS), the depreciation basis is the unadjusted full purchase price.īook Value (BV j): The book value is simply the difference between the purchase price and the accumulated depreciation. Salvage Value (S n): The salvage value is the estimated value of the asset at the end of the depreciation period.ĭepreciation Period (n) or Recovery Period: This is the estimated useful life or service life of the asset in years.ĭepreciation Basis (C-S n): The depreciation basis is the portion of the cost used to calculate the depreciation and is usually the cost minus the salvage value. Declining Balance Depreciation with Switch to Straight-LineĬost (C): This is the purchase price or cost of the asset.

The boolean value TRUE as the last argument tells the function NOT to switch to straight-line. The VDB (variable declining balance) function is a more general depreciation formula that can be used for switching to straight-line (see below). The Excel function, DDB(), handles all of that for you. The Salvage Value is not included in the Book Value calculation for the declining balance method, so that necessitates the use of the MIN and MAX functions in the above formula. The Book Value is not allowed to be less than the Salvage Value. This method is commonly called the Double-Declining Balance Method because the depreciation rate that is used is usually double the straight-line rate or d=2/ n. In the declining balance method, the depreciation for year j is calculated by multiplying the book value at the end of the prior period (cost - accumulated depreciation from prior periods) by a fixed depreciation rate, d.

Amortization schedule in excel template