Hi All,
I trust you are all well. I was really hoping someone would be able to help me with a query that I have for the reducing the balance method of depreciation in Excel.
1. How would I calculate the percentage to use based on say an asset NBV of £25,000, salvage value of £5,000 and a useful life of 5 years,
2. How on earth do I go about putting that into an Excel formula.
Maybe someone would be kind enough to assist??
Thanks
Ant
Replies (9)
Please login or register to join the discussion.
Is this close enough?
Hi Anthony
Does the percentage 2.6467% get you close enough?
Regards
Elliott
Try DB
Do you want to know the percentage? Or do you just want Excel to work it out.
The formula =DB(25000,5000,5,x) will give you the depreciation for period x (between 1 and 5).
From that you can then calculate the constant reducing balance percentage, which is 27½%.
I just did...
... £6875/£25000 = 27½%. It works for all the other periods too.
If you get an old enough accounting textbook, there is a complex mathematical formula to derive the rate. But then spreadsheets were invented.
So you could get to it by doing =25000/DB(25000,5000,5,1).
The Formula
The formula is
rate = (salvage / cost) ^ (1 / useful life) -1
i.e. rate = (5000/25000)^(1/5)-1
regards
Zubair Edhy
Replying to the string below, I have the useful life of an asset and want to calculate the depreciation rate under the reducing balance method in Microsoft Excel. How do I do that?
To calculate the depreciation rate under the reducing balance method, when the useful life is known, I can use the following excel formula:
Depreciation Rate = round(1/(cost base/DB(cost base, residual scrap value, useful life in years,1)),2).
How do I get the depreciation rate, when I know the useful life? Any thoughts please?