Work out depreciation (declining balance) instantly with clear inputs, formula shown and shareable results.
Reducing-balance depreciation applies a constant rate to the falling carrying amount, so the charge is large in early years and tapers away. It suits assets that lose value fastest when new — vehicles, IT hardware, plant — and never quite reaches zero, so the residual value acts as a floor and the remaining depreciable amount shows how much is still to be written off.
Annual charge
Charge = Opening book value x Rate
Closing book value
Closing NBV = Opening NBV - Charge, floored at residual value
Remaining depreciable amount
Remaining = Net book value - Residual value
A common approximation is 1 to 2 times the straight-line rate. Tax rules in many jurisdictions prescribe the rate by asset class.
Because each year removes only a fraction of what remains. In practice a residual floor or a switch to straight-line finishes the asset off.