Declining Balance Depreciation Calculator

Understanding the declining balance depreciation calculator — concept and principle

Declining balance depreciation is an accelerated method: it writes off a larger part of an asset's cost in the early years and smaller amounts later. It suits vehicles, computers and machinery that lose value quickly. With a rate factor of 2 it becomes the familiar double-declining balance (DDB) method. The calculator works with any currency; the example uses US dollars.

The charge is biggest in year 1 and shrinks every year; the last year is cut so book value stops at salvage.

How it is calculated

Rate per year = rate factor ÷ useful life
Depreciation for a year = opening book value × rate, but never more than opening book value − salvage value
Closing book value = opening book value − depreciation

The calculator repeats this year by year from the asset cost until it reaches the year you choose, then shows that year's depreciation and the book value at the end of it. Salvage value is not used to set the rate; it only acts as a floor the book value cannot go below.

The principle

Straight-line depreciation spreads cost evenly: 1 ÷ life each year. The declining balance method multiplies that straight-line rate by a factor (2 for double-declining, 1.5 for 150%) and applies it to the remaining book value rather than the original cost. Because the base shrinks each year, the charge shrinks too, producing a curve that falls fast at first and then flattens. A fixed percentage of a falling balance never reaches zero on its own, which is why a salvage floor (or, in practice, a later switch to straight-line) is needed to finish the schedule.

Worked example

Inputs: cost $50,000, salvage $5,000, life 5 years, factor 2, year 1.
Rate: 2 ÷ 5 = 40% per year.
Year 1 depreciation: 50,000 × 0.40 = $20,000.00.
Check the floor: 50,000 − 5,000 = 45,000, so 20,000 is allowed.
Book value at end of year 1: 50,000 − 20,000 = $30,000.00.

Continuing, years 2–4 give $12,000, $7,200 and $4,320; in year 5 the charge is capped at $1,480 so the book value stops at exactly $5,000.

How to read the result

Compare the result with straight-line depreciation, which here would be (50,000 − 5,000) ÷ 5 = $9,000 a year. The accelerated method shows lower profit early and higher profit later, though total depreciation over the life is the same. A higher factor front-loads the expense even more.

Common mistakes

Subtracting salvage value before applying the rate; under this method the rate applies to full book value.
Letting book value fall below salvage value.
Assuming tax depreciation rules match this textbook method; tax systems often set their own rates, conventions and switch rules.

Keep in mind: This calculator does not switch to straight-line or apply half-year or other tax conventions. Use your local accounting standards and tax rules for real financial statements and returns. It is not tax or accounting advice.

Frequently asked questions

What is the double-declining balance rate for a 10-year asset?

2 ÷ 10 = 20% of the remaining book value each year.

Is declining balance allowed under IFRS?

Yes. IAS 16 lists the diminishing balance method as one acceptable method if it reflects how the asset's benefits are used up.

Sources: IFRS Foundation, IAS 16 Property, Plant and Equipment · IRS Publication 946, How To Depreciate Property

Checked 8 Nov 2026. Standard business and finance formulas. Estimates for information only.

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