What is a Declining Balance Method?

Declining Balance Method / Decreasing Balance Method refers to a type of accelerated depreciation method. This method is a method of calculating the initial depreciation value of each period of fixed assets (the original value less accumulated depreciation) by a fixed percentage to calculate the depreciation amount for the period. Fast-promoting electronics manufacturing enterprises and shipbuilding enterprises.

Declining balance method

This fixed percentage is the rate at which

Case Analysis:

The original cost of a certain fixed asset is 10,000 yuan, the expected useful life is 5 years, the estimated residual value is 1,000 yuan, and the estimated cleaning cost is 500 yuan. then:

Depreciation rate

= 1- (1000/10000) ^ (1/5)

= 36.90%

The annual depreciation amount should be calculated as follows:

Term (end of period)	Depreciation amount (yuan)	Accumulated depreciation amount (yuan)	Net value (yuan)
Initial cost			10000
1	3690	3690	6310
2	2328.4	6018.4	3981.6
3	1469.2	7487.6	2512.4
4	927	8414.6	1585.3
5	585	9000	1000

Using the declining balance method, the estimated residual value is not deducted from the original value of the fixed assets when calculating the depreciation amount, such as the depreciation amount in the first period is 10000 × 0.369 = 3690. This is because the asset's net book value decreases as the year increases, with the result that the depreciation fee per period becomes smaller and smaller over the entire useful life of the asset. The estimated residual value has been taken into account when calculating the depreciation rate. Using this method to accrue depreciation can ensure that the net book value of fixed assets is exactly equal to the estimated residual value at the end of the entire useful life.