The Excel DDB Function
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Basic Description
The Excel DB 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 as shown in the table below:
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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:
where,
- 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)
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| cost |
- |
The initial cost of the asset
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| salvage |
- |
The value of the asset at the end of the depreciation
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| life |
- |
The number of periods over which the asset is to be depreciated
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| period |
- |
The period number for which you want to calculate the depreciation
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| [factor] |
- |
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
(specifying the double declining depreciation method)
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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.
Formulas:
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Results:
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Further examples of the Excel DDB function can be found on the
Microsoft Office website.
Trouble Shooting
If you get an error from the Excel DDB Function, this is likely to be one of the following :
Common Errors
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#NUM!
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Occurs if either:
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The supplied cost or the supplied salvage argument is < 0
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Any of the supplied life, period or [factor] arguments are ≤ 0
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period > life
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#VALUE!
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-
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Occurs if any of the supplied arguments are not numeric values
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