Declining Balance Depreciation: the formula (and what it really means)

Depreciation is the accounting way of spreading an asset’s cost across the years you use it. If you buy a laptop, a machine, a company vehicle, or even certain equipment, you typically don’t treat the whole purchase as a single “expense” at once. Instead, you allocate that cost over time.

The declining balance method is a family of depreciation approaches that deliberately accelerate depreciation into earlier years. That’s why you’ll also hear phrases like “accelerated depreciation,” “DDB,” or “150% declining balance.” The big idea is simple:

• Pick a depreciation rate (a percent per year).
• Apply that rate to the asset’s beginning book value each year.
• Stop depreciating once you reach the salvage value (also called residual value).

• Cost (basis): What you paid for the asset, plus costs to get it ready for use (shipping, setup, installation).
• Salvage value: What you expect the asset to be worth at the end of its useful life. This is the “floor” we won’t go below.
• Useful life: How many years you expect to use the asset.
• Book value: Cost minus accumulated depreciation. It’s the asset’s accounting value.
• Accumulated depreciation: Total depreciation recognized so far.

For year t, the basic declining balance depreciation expense is:

Depreciation_t = Rate × Book Value at the start of year t

Where Rate is a fixed percentage (for example 40% per year), and the book value updates each year:

End Book Value_t = Begin Book Value_t − Depreciation_t

The critical guardrail is salvage value. In the real world (and in most textbooks), you typically do not depreciate below salvage value. So the calculator applies this rule:

Depreciation_t = min( Rate × Begin Book Value_t, Begin Book Value_t − Salvage )

That “min” makes sure we never subtract more than the remaining depreciable amount. If the math would push the asset below salvage, we cap depreciation so the ending book value equals salvage.

Double-declining balance uses a rate derived from the straight-line rate. Straight-line depreciation spreads cost evenly, so its rate is:

Straight-line rate = 1 ÷ Useful life

DDB simply doubles it:

DDB rate = 2 × (1 ÷ Useful life)

Example: If useful life is 5 years, straight-line rate is 1/5 = 20%. DDB rate is 2 × 20% = 40%. That’s why people often say “DDB is 200% of straight-line.”

150% DB is the same idea, just less aggressive than DDB:

150% DB rate = 1.5 × (1 ÷ Useful life)

With a 5-year life, 150% DB rate is 1.5 × 20% = 30%.

The rate stays constant. The book value does not. Because you apply the rate to the current book value, and book value declines after every year’s depreciation, the depreciation expense naturally shrinks over time. That’s exactly what the schedule table is showing you.

Step-by-step: what the calculator is doing

If you want to double-check homework or understand how accounting software produces depreciation schedules, this section is your “behind the scenes” walkthrough.

• Cost must be greater than 0.
• Salvage value must be 0 or greater.
• Useful life must be at least 1 year (whole number).
• Cost must be greater than salvage (otherwise there’s nothing to depreciate).

The calculator picks a rate based on the method:

• DDB: Rate = 2 ÷ life
• 150% DB: Rate = 1.5 ÷ life
• Custom: Rate = (custom percent) ÷ 100

Note: Some textbooks use “DDB” and then switch to straight-line when it yields a higher depreciation later. This page focuses on the declining balance schedule with a salvage floor — the most common “pure DB” calculation.

Start with Begin Book Value = Cost. Then for each year:

• Compute tentative depreciation = Rate × Begin Book Value
• Compute max allowed depreciation = Begin Book Value − Salvage
• Use the smaller of the two, so End Book Value never goes below salvage
• Add depreciation to accumulated depreciation
• Set next year’s Begin Book Value to this year’s End Book Value

Once the schedule is done, we show:

• First-year depreciation (the “big number” most people want immediately)
• Ending book value after the final year
• Total accumulated depreciation
• A schedule table that’s easy to screenshot or export as CSV

You can save multiple runs (for example, different useful lives or different methods) and compare them. Exporting as CSV makes it easy to paste into Excel, Google Sheets, or homework solutions.

Declining balance depreciation examples (with real numbers)

Examples make the method “click.” Below are a few scenarios that show how changing the method or rate changes the schedule. You can copy these inputs directly into the calculator to confirm the results.

Suppose an asset costs $12,000, salvage value is $2,000, and useful life is 5 years. DDB rate = 2 ÷ 5 = 40%.

• Year 1: 40% × 12,000 = 4,800 → End BV = 7,200
• Year 2: 40% × 7,200 = 2,880 → End BV = 4,320
• Year 3: 40% × 4,320 = 1,728 → End BV = 2,592
• Year 4: 40% × 2,592 = 1,036.80 but you can’t go below salvage (2,000). Max allowed is 592 → End BV = 2,000
• Year 5: Already at salvage → Depreciation = 0

Notice what happened: the method “finished early” because we hit the salvage floor. That’s totally normal. Some schedules keep showing the remaining years with zero depreciation (the calculator does this) so your table still matches the useful life you entered.

Same asset, but 150% DB rate = 1.5 ÷ 5 = 30%.

The depreciation is still front-loaded, but it’s not as extreme as DDB. You’ll typically hit the salvage value later, and the annual depreciation amounts are smoother.

Some problems say “use 25% declining balance.” That’s a custom rate. Enter: Cost = $8,500, Salvage = $500, Life = 6, Method = Custom, Rate = 25%.

In this case, the rate isn’t derived from the useful life — it’s given directly. That’s why the calculator includes a custom mode.

A simple way to sanity-check your schedule:

• Your book value should never go below salvage value.
• Depreciation amounts should generally decrease over time (until the salvage floor caps them).
• Total accumulated depreciation (after all years) should be approximately cost − salvage.

If you see a schedule that violates those, it’s either a different rule set (like switching to straight-line late in the asset life) or there’s a math/rounding issue.

Frequently Asked Questions

• What is declining balance depreciation?

  It’s an accelerated depreciation method where you apply a fixed percentage to the asset’s current book value each year. Because book value falls over time, depreciation expense naturally declines — hence the name.

• What’s the difference between DDB and 150% declining balance?

  Both are declining balance methods based on the straight-line rate (1 ÷ life). DDB uses 2× that rate, while 150% DB uses 1.5×. DDB depreciates faster in early years.

• Why does depreciation sometimes become zero before the last year?

  Because the method is capped by salvage value. Once book value hits salvage, there’s nothing left to depreciate. Many schedules still list the remaining years as zero to match the stated useful life.

• Does declining balance always use salvage value?

  In many textbook and practical schedules, yes — salvage sets the minimum book value. Some contexts may treat salvage differently. If your assignment says “ignore salvage,” set salvage to 0 to approximate that rule.

• Should I switch to straight-line halfway through?

  Some accounting schedules switch when straight-line yields a larger depreciation in later years (a hybrid method). If your instructions explicitly mention switching, you’ll want a DDB-to-SL switch calculator. This page focuses on the standard declining balance schedule with a salvage floor.

• Is this for taxes or for financial statements?

  This calculator matches common accounting math used in coursework and planning. Tax depreciation often follows specific rules (for example MACRS in the U.S.) that can differ from book depreciation. Use this as a learning and planning tool.

• How do I use this for homework?

  Enter the exact values given in the problem. If it says “double-declining,” select DDB. If it provides a rate (like 20%), select Custom and enter 20. Then copy the schedule table into your solution.

• Why do my numbers differ slightly from my teacher’s?

  The most common reason is rounding rules (round each year vs. round at the end) or a rule difference (pure declining balance vs. switching to straight-line). Try changing the rounding dropdown to match your class format.