Declining balance depreciation
In one sentenceA depreciation method that applies a fixed rate to the remaining book value each year, so depreciation is large in the early years and then declines.
Simply put
Some assets give you most of their benefit in their early years, such as devices and vehicles. This method charges those years more depreciation.
The rate is the same every year, but it is applied to a shrinking figure (the book value after the previous years' depreciation), so the expense falls year after year.
Worked example
A printing press bought a machine for 100,000 SAR and decided to depreciate it at 40% of book value (an assumed rate for illustration).
First-year depreciation: 100,000 × 40%40,000 SAR
Book value after it: 100,000 − 40,00060,000 SAR
Second-year depreciation: 60,000 × 40%24,000 SAR
Book value after two years: 60,000 − 24,00036,000 SAR
Formula: Year's depreciation = Book value at the start of the year × Depreciation rate
Don't confuse it with
Straight-line depreciationStraight-line gives the same amount every year, while declining balance starts large and then falls.
in FullScreen ERP
The system supports the straight-line and declining-balance methods according to the asset's category. Fixed assets