BlackBerry | Depreciation

This template is for depreciation calculations. Depreciation is an important source of revenue reduction in businesses. The four most common depreciation methods for book purposes are available: straight-line, declining balance, sum-of-the-year's digits, and declining-balance crossover. A separate template provides ACRS depreciation, often used for tax purposes.

Variables

  • Method: depreciation method. See Calculation Methods below for more information.
  • Cost: the cost to purchase the asset.
  • Salvage: the assumed value of the asset at the end of the asset's life.
  • Life: the length of time the asset will be in service.
  • Month 1: the first month the asset will be placed in service where January is 1 and December is 12. Entering "6.5", for example, means the asset was placed into service half way through the sixth month (approximately June 15).
  • Dep Rate%: the declining balance rate. This is used in DB and DB x SL calculations. This is entered as a percentage. For example, 200% declining is entered as "200".
  • Year: year to calculate depreciation.
  • Dep Amount: amount of depreciation for the year.
  • Book Value: original cost of the asset less accumulated depreciation. Accumulated depreciation is the total depreciation taken through the calculated year. This is the value of the asset remaining on the company's books.
  • Dep Value: depreciation value. This is the book value less the salvage value for the asset.
Because an asset can begin depreciation on a date other than the first of the year, the calendar life may be greater than the amount entered for Asset Life. For instance, if an asset is expected to have a useful life of 3 years, beginning in March (the third month), the last calendar year is actually the fourth year.

Calculations

The straight-line (SL) method depreciates the same amount every year of the asset's life.

The declining balance (DB) method depreciates more in the first few year's of the assets life than in the later years. This method, along with the DB x SL method, uses the declining balance rate to calculate the depreciation value.

The declining balance cross straight-line (DB x SL) method is often used for tax purposes. In this instance, the declining balance method is used until the optimal time to switch to the straight-line method. The calculator determines this point when depreciation is higher using the straight-line method than the declining balance method. This method also uses the declining balance rate for depreciating.

The sum of the year's digits (SOYD) method, like declining balance, allocates more depreciation to the early years of the asset's life. This method uses a complex formula based upon the number of years the asset will be in service to determine a depreciation rate.