Declining Balance Method / Reducing Balance Method / Fix Rate Method

The method under which asset is depreciated at fixed percentage until the value of the asset bring down to its residual value.

Depreciation Expense = Book Value x Accelerated Depreciation Rate

Don’t deduct salvage value when figuring the depreciable base for the declining balance method. but do limit depreciation so that, at the tip of the day, the asset’s net book value is the same as its calculable salvage value. 

Suppose a business has an asset with $1,000 original price, $100 salvage value, and five years of useful life.

Depreciation rate	Depreciation expense	Accumulated depreciation	Book value at end of year
			original cost $1,000.00
40%	400.00	400.00	600.00
40%	240.00	640.00	360.00
40%	144.00	784.00	216.00
40%	86.40	870.40	129.60
129.60 - 100.00	29.60	900.00	scrap value 100.00

When using the double-declining-balance technique, the salvage worth isn't considered in decisive the annual depreciation, but the book value of the asset being depreciated isn't brought below its salvage value, considered the method used. Depreciation ceases once either the salvage worth or the top of the asset's helpful life is reached.

Since double-declining-balance depreciation doesn't continually depreciate AN quality totally by its finish of life, some methods additionally cipher a straight-line depreciation annually, and apply the bigger of the 2. This has the effect of changing from declining-balance depreciation to straight-line depreciation at a midpoint within the asset's life.

With the declining balance technique, one will notice the rate of depreciation that would permit exactly for full depreciation by the end of does not, mistreatment the formula: