Depreciation – Calculation examples

Examples of the different methods can be found below.

Declining balance depreciation

Deprecation is made based on the residual value. The system calculates and records the same value every month during the year. The depreciation for each year is based on the residual value at the start of the year. The depreciation ends when the object reaches a value which is entered in the Depreciate to residual value field, in the Register fixed assets object procedure.

  • Year of purchase: 2010
  • Month of purchase: October
  • Purchase value: 10,000
  • Depreciation percent: 25%
Year Year Value Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total dep. during year Residual value
2010 1 10000                   208.33 208.33 208.33 625.00 9375.00
2011 2 9375.00 195.31 195.3 195.3 195.3 195.3 195.3 195.3 195.3 195.3 195.3 195.3 195.3 2343.75 7031.25
2012 3 7031.25 146.48 146.48 146.48 146.48 146.48 146.48 146.48 146.48 146.48 146.48 146.48 146.48 1757.81 5273.44
2013 4 5273.44 109.86 109.86 109.86 109.86 109.86 109.86 109.86 109.86 109.86 109.86 109.86 109.86 1318.36 3955.08
2014 5 3955.08 82.40 82.40 82.40 82.40 82.40 82.40 82.40 82.40 82.40 82.40 82.40 82.40 988.77 2966.31
2015 6 2966.31 61.80 61.80 61.80 61.80 61.80 61.80 61.80 61.80 61.80 61.80 61.80 61.80 741.58 2224.73
2016 7 2224.73 46.35 46.35 46.35 46.35 46.35 46.35 46.35 46.35 46.35 46.35 46.35 46.35 556.18 1668.55
2017 8 1668.55 34.76 34.76 34.76 34.76 34.76 34.76 34.76 34.76 34.76 34.76 34.76 34.76 417.14 1251.41
2018 9 1251.41 26.07 26.07 26.07 26.07 26.07 26.07 26.07 26.07 26.07 26.07 26.07 26.07 312.85 938.56
2019 10 938.56 19.55 19.55 19.55 19.55 19.55 19.55 19.55 19.55 19.55 19.55 19.55 19.55 234.64 703.92
2020 11 703.92 14.66 14.66 14.66 14.66 14.66 14.66 14.66 14.66 14.66 14.66 14.66 14.66 175.98 527.94
2021 12 527.94 11.00 11.00 11.00 11.00 11.00 11.00 11.00 11.00 11.00 11.00 11.00 11.00 131.98 395.95

Declining balance + Straight-line depreciation

The depreciation is based on the residual value at the start, and moves over to straight-line depreciation when the value reaches the point where the straight-line depreciation is higher. The method is then changed to straight-line depreciation.

In this example, declining-balance depreciation takes place in the first two years. The total yearly depreciation is higher than if it would have been straight-line. In year three, the depreciation method is changed to straight-line. The depreciation ends when the object reaches its lowest residual value.

  • Year of purchase: 2022
  • Month of purchase: February
  • Purchase value: 450000.00
  • Depreciation percent (Declining balance): 40%
  • Depreciation percent (Straight-line): 20%
Year Opening value Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total depreciation during the year Residual value Depreciation method
2022 450000.00   15000.00 15000, 15000, 15000, 15000, 15000, 15000, 15000, 15000, 15000, 15000, 165000.00 285000.00 Declining balance
2023 285000.00 9500.00 9500.00 9500.00 9500.00 9500.00 9500.00 9500.00 9500.00 9500.00 9500.00 9500.00 9500.00 114000.00 171000.00 Declining balance
2024 171000.00 7500.00 7500.00 7500.00 7500.00 7500.00 7500.00 7500.00 7500.00 7500.00 7500.00 7500.00 7500.00 90000.00 81000.00 Straight-line
2025 81000.00 7500.00 7500.00 7500.00 7500.00 7500.00 7500.00 7500.00 7500.00 7500.00 7500.00 7500.00 7500.00 81000.00 0 Straight-line
2026 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0