Declining balance: the same rate, a shrinking base
Most assets lose value fastest when new. The declining-balance method captures that by applying a fixed percentage to whatever value remains each year, so the amount written off falls as the asset ages. This calculator runs that schedule and shows what is left.
The formula
Worked example: $10,000 at 20% over 3 years
| Year | Opening value | Depreciation | Closing value |
|---|---|---|---|
| 1 | $10,000 | $2,000 | $8,000 |
| 2 | $8,000 | $1,600 | $6,400 |
| 3 | $6,400 | $1,280 | $5,120 |
- Total depreciation: $4,880
- Book value after 3 years: $5,120
The charge falls every year — $2,000, then $1,600, then $1,280 — because 20% is taken from a smaller figure each time. The asset never reaches zero under this method; it approaches it.
Declining balance against straight line
Straight-line depreciation spreads the cost evenly. On the same asset with a three-year life and no salvage value, that is $3,333 a year, and the book value after three years is zero rather than $5,120.
| Year | Declining balance 20% | Straight line, 3 years |
|---|---|---|
| 1 | $2,000 | $3,333 |
| 2 | $1,600 | $3,333 |
| 3 | $1,280 | $3,333 |
Straight line is simpler and front-loads nothing. Declining balance matches the economics of vehicles, computers and machinery, whose resale value drops sharply in year one and slowly afterwards.
Choosing the rate
A common convention is double the straight-line rate: an asset with a five-year life gets 40%, a ten-year asset 20%. That is the double-declining-balance method, and it is what most accounting standards mean by accelerated depreciation.
Tax authorities often prescribe the rate by asset class. Using a different one for management accounts is fine; using it on a tax return is not.
Salvage value and the switch
Because declining balance never reaches zero, businesses usually switch to straight line for the final years so the book value lands on the expected salvage value. Where an asset will be sold for $1,000, the schedule is adjusted so that is where it ends.
What this calculator leaves out
Partial first years, salvage value, and the tax rules of any particular country. It also treats the rate as constant, whereas some regimes step it down after a set number of years.
Related calculators
- Car depreciation calculator — the same curve applied to a vehicle
- Accumulated depreciation — the running total rather than the yearly charge