Double Declining Balance Method of Depreciation
Double Declining Balance Method of Depreciation:
Learning Objectives:
 Define and explain the double declining balance method of depreciation.
 What is double declining balance formula and and also provide example.
Double declining balance method is another type of accelerated depreciation method followed generally in USA. The depreciation expense is computed by multiplying the asset cost less accumulated depreciation by twice the straight line rate expressed in percentage. No provision is made for salvage value of the asset.
Double declining balance formula is used to calculate the rate:
Double Declining Balance Rate = (100%/Years of Useful Life) × 2 
Example:
A printing machine is purchased for $20,000 on January 1991. The scrap value is estimated at $2,000 at the end of 5 years useful life of the asset.
Required: Calculate the annual depreciation charge by applying double declining balance method
Solution:
Depreciation rate (100%/5) × 2 = 40%
The following table shows the depreciation for the five year period:


End of Year  Asset Cost  Rate depreciation  Amount depreciation  accumulated depreciation  Book Value 


1  20,000  40%  8,000  8,000  12,000 
2  20,000  40%  4,800  12,800  7,200 
3  20,000  40%  2,880  15,680  4,320 
4  20,000  40%  1,728  17,408  2,592 
5  20,000  40%  1,037  18,445  1,555 

In applying this method the entire original cost can never be depreciated. There is bound to be some balance though only a small one. In this example, a salvage value of $1,555 isautomatically provided for. However, an asset should not be depreciated below it salvage value of $2,000. Therefore the depreciation expenses at the end of fifty year should be $592 and not $1,037
You may also be interested in other articles from “accounting for depreciation” chapter:
 Definition and Explanation of Depreciation
 Causes of Depreciation
 Need for Depreciation
 Depreciation, Depletion and Amortization
 Difference Between Depreciation and Fluctuation
 Basic Factors of Determination of Depreciation
 Depreciation Methods / Methods for Providing Depreciation
 Fixed Installment Method / Straight Line Method / Original Cost Method
 Diminishing balance/written Down Value/Reducing Installment Method of Depreciation
 Annuity Method of Depreciation
 Depreciation Fund Method or Sinking Fund Method
 Insurance Policy Method of Depreciation
 Revaluation Method of Depreciation
 Sum of the Years’ Digits Method of Depreciation
 Double Declining Balance Method of Depreciation
 Depletion Method of Depreciation
 Basis of Use System of Depreciation
 Depreciation Of Various Assets
 Depreciation Accounting – General Questions and Answers
What is the formula of Double declining balance ?
Double Declining Balance Rate = (100%/Years of Useful Life) × 2