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Declining Balance Method Explained

The declining balance method is an accelerated depreciation method that records higher depreciation expenses in early years of an asset's life and lower expenses in later years. The depreciation each year is calculated as a percentage, k, of the book value at the beginning of that year. Two examples are provided: one calculating the selling price of a resistor after 5 years with 10% annual depreciation, and another finding the book value of a computer initially worth $50,000 with 20% annual depreciation after 9 years.

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11 views8 pages

Declining Balance Method Explained

The declining balance method is an accelerated depreciation method that records higher depreciation expenses in early years of an asset's life and lower expenses in later years. The depreciation each year is calculated as a percentage, k, of the book value at the beginning of that year. Two examples are provided: one calculating the selling price of a resistor after 5 years with 10% annual depreciation, and another finding the book value of a computer initially worth $50,000 with 20% annual depreciation after 9 years.

Uploaded by

GM Yin Shuyin Yang
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

DECLINING

BALANCE METHOD
 The declining balance method is an
accelerated depreciation system of
recording larger depreciation expenses
during the earlier years of an asset’s
useful life and recording smaller
depreciation expenses during the asset's
later years.
where k= ratio of depreciation in any one
year to the
book value at the beginning of
that year
Example 1

 A resistor has a selling price of P 400. It it’s


selling price is expected to decline at a certain
rate of 10% per annum due to obsolescence,
what will be it’s selling price after 5 years?
 Given:
FC = Php 400 Solution:

k = 10%
m = 5 years
Example 2

 A computer machine initially worth P 50,000


depreciates in value each year by 20% of its
value at the beginning of that year. Find its
book value when it is 9 year old.
Solution:
 Given:
FC = Php 50,000
k = 20%
m = 9 years
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