Declining-balance depreciation
Reduce the prior balance by a fixed annual percentage without going below residual value.
How this works
Remaining book value = max(residual value, cost × (1−r)^n), where r is the annual depreciation percentage divided by 100 and n is whole years elapsed. Accumulated depreciation = cost − remaining book value. The residual value acts as a floor.
Example
The illustration may use different inputs from the reproducible default inputs listed below.
The defaults give $10,000 × (1 − 0.20)^3 = $5,120, which is above the $1,000 residual floor. Accumulated depreciation is $10,000 − $5,120 = $4,880. With all reset-default inputs, remaining book value: $5,120.
- Asset cost ($)
- 10000
- Minimum residual value ($)
- 1000
- Annual depreciation rate (%)
- 20
- Whole years elapsed
- 3
- Remaining book value
- $5,120
Scope and assumptions
Uses the same entered percentage each year and does not switch to straight-line depreciation. It excludes partial-year conventions, impairment and tax rules. This is a book-value illustration, not an estimate of resale value.
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