The Excel DDB Function
Related Function:DB Function
Double Declining Balance Depreciation
When calculating the depreciation of an asset, it is common to use an accelerated depreciation calculation, in which the calculated value of an asset is reduced by a larger amount during the first period of its lifetime, and smaller amounts during subsequent periods.
One of the most popular accelerated depreciation methods is the Double Declining-Balance Method, in which the straight-line depreciation rate is doubled. A useful example of this is provided on the Wikipedia depreciation page
The Excel DDB function uses the following equation to calculate the depreciation:
- salvage = final value of the asset at the end of its lifetime;
- value = value of the asset at the start of the period
(= Initial cost - total depreciation from previous periods);
- life = number of periods over which the depreciation occurs;
- factor = rate of decline (= 2 for the double-declining balance method).
The Excel DDB function calculates the depreciation of an asset, using the Double Declining Balance Method, or another specified depreciation rate.
The format of the function is:
DDB( cost, salvage, life, period, [factor] )
where the arguments are:
|cost||-||The initial cost of the asset.|
|salvage||-||The value of the asset at the end of its useful life.|
|life||-||The number of periods over which the asset is to be depreciated.|
|period||-||The period number for which you want to calculate the depreciation.|
An optional argument that is used to specify the rate of depreciation.
If the [factor] argument is omitted from the function, it takes on the default value of 2 (denoting the double declining depreciation method).
DDB Function Example
In the example below, the DDB function uses the double declining depreciation method to calculate 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.
|2||=DDB( 10000, 1000, 5, 1 )|
|3||=DDB( 10000, 1000, 5, 2 )|
|4||=DDB( 10000, 1000, 5, 3 )|
|5||=DDB( 10000, 1000, 5, 4 )|
|6||=DDB( 10000, 1000, 5, 5 )|
|1||Depreciation||Asset Value at End of Period|
|2||4000.00||- Asset value at end of Yr 1 is $10,000 - $4,000 = $6,000|
|3||2400.00||- Asset value at end of Yr 2 is $6,000 - $2,400 = $3,600|
|4||1440.00||- Asset value at end of Yr 3 is $3,600 - $1,440 = $2,160|
|5||864.00||- Asset value at end of Yr 4 is $2,160 - $864 = $1,296|
|6||296.00||- Asset value at end of Yr 5 is $1,296 - $296 = $1,000|
Further details and examples of the Excel DDB function are provided on the Microsoft Office website.
DDB Function Common Errors
If you get an error from the Excel DDB Function, this is likely to be one of the following:
Occurs if either:
- The supplied cost or the supplied salvage argument is < 0;
- Any of the supplied life, period or [factor] arguments are ≤ 0;
- The supplied period > life.
|#VALUE!||-||Occurs if any of the supplied arguments are not numeric values.|