When calculating the depreciation of an asset, several different calculations can be used.
One of the most popular methods of calculating depreciation is the Fixed Declining-Balance Method, in which, for each period of an asset's useful lifetime, the calculated value is reduced by a fixed percentage of the asset's value at the start of the period.
The Excel DB Function uses the Fixed Declining Balance Method, using the following constant percentage reduction per period (rounded to 3 decimal places) :
The Excel DB function calculates the depreciation of an asset, using the Fixed Declining Balance Method, for each period of the asset's lifetime.
The format of the function is :
where the arguments are as shown in the table below:
|cost||-||The initial cost of the asset|
|salvage||-||The value of the asset at the end of the depreciation|
|life||-||The number of periods over which the asset is to be depreciated|
|period||-||The period number for which we want to calculate the depreciation|
An optional argument that is used to specify a partial year for the first period of depreciation
If the [month] argument is supplied, this should be a integer that specifies how many months of the year are used in the calculation of the first period of depreciation.The number of months in the last period of depreciation is then calculated as 12 - [month]
In the example below, the DB function is used to find the yearly depreciation of an asset that cost $10,000 at the start of year 1, and has a salvage value of $1,000 after 5 years.
Note that, in this example, the yearly rate of depreciation, calculated from the equation 1-(Salvage/Cost)^(1/Life) is calculated to be 36.9%
In the example below, the DB function is used with the same cost, salvage and life argument values as in Example 1 above. However, in the following example, the depreciation calculation starts 6 months into year 1.
As the cost, salvage and life arguments are the same as in the previous example, the yearly rate of depreciation, is again calculated to be 36.9%
Further examples of the Excel DB function can be found on the Microsoft Office website.
If you get an error from the Excel DB Function, this is likely to be one of the following :
|#VALUE!||-||Occurs if any of the supplied arguments are not numeric values|