What Is Diminishing Balance Depreciation?

The depreciation depreciation method is also called accelerated depreciation method. Under this method, the depreciation charge of fixed assets for each period is different. It is raised more in the early period of use and less in the later period of use. The value will be compensated as soon as possible during the period of use. With the decreasing depreciation method, the depreciation amount of each year shows a decreasing trend.

Decreasing depreciation

discuss

The depreciation depreciation method is also called accelerated depreciation method. Under this method, the depreciation charge of fixed assets for each period is different. It is raised more in the early period of use and less in the later period of use. The value will be compensated as soon as possible during the period of use. With the decreasing depreciation method, the depreciation amount of each year shows a decreasing trend.

Chinese name

Decreasing depreciation

Foreign name

zhejiufa

Types of

algorithm

Place

Beijing

classification

The commonly used depreciation and depreciation methods are the double declining balance method and the sum of years method.

(1) Double declining balance method. This method is a method of calculating the depreciation of fixed assets based on the net book value of each period of fixed assets and the depreciation rate based on the straight-line method doubling the net residual value. The calculation formula is as follows:

Annual depreciation rate = 2 ÷ estimated useful life × 100%

Monthly depreciation rate = annual depreciation rate ÷ 12

Monthly depreciation amount = net book value of fixed assets × monthly depreciation rate

Under the double-declining method, because the net residual value is not taken into account in calculating the depreciation rate, in order to make the total depreciation amount of each period equal to the total accrued depreciation amount, the last two years before the depreciation period expires, Instead, the amortized average of the net value of the fixed assets after deducting the estimated residual value according to the annual average method.

[Example 1] The original price of a certain equipment is 50,000 yuan, the effective service life is 5 years, and the estimated residual value is 2,000 yuan. The depreciation amount calculated annually based on the double-declining balance method is shown in Table 1.

Annual depreciation rate = 2 ÷ 5 × 100% = 40%

Table 1

Depreciation calculation table

(Double declining balance method) Unit: Yuan

Year	Depreciation base	Annual depreciation rate	Annual depreciation	Accumulated depreciation	Book value
0					50 000
1	50 000	40%	20 000	20 000	30 000
2	30 000	40%	12 000	32 000	18 000
3	18 000	40%	7 200	39 200	10 800
4	10 800	Straight line method	4 400	43 600	6 400
5	6 400	Straight line method	4 400	48 000	2 000

(2) The sum of years method. The sum of years method, also known as the total years method, is to calculate the annual depreciation amount by multiplying the net value of the fixed asset by subtracting the residual value from a year-by-year decrease. The sum of year-to-year numbers representing years of use. The calculation formula is as follows:

Annual depreciation rate = number of remaining years ÷ total number of years of expected life =

(Estimated useful life-based on useful life) ÷ Estimated useful life × [(Estimated useful life +1) ÷ 2] × 100%

Annual depreciation amount = (original value of fixed assets-estimated net residual value) × annual depreciation rate

Monthly depreciation amount = annual depreciation amount ÷ 12 ^[1]