Double Declining Balance Depreciation The declining-balance method of depreciation is in accord with generally accepted accounting principles, or GAAP.

It is an accelerated method when compared to other methods such as straight-line, and uses various multiples of the straight-line rate to calculate depreciation on company assets. It does not expense depreciation evenly, as does the straightline method, but expenses higher depreciation in the asset's earlier years, since it is calculated against the asset's book value and not its depreciable basis. The double declining balance depreciation method is like the straight-line method on steroids. To use it, accountants first calculate depreciation as if they were using the straight line method. They then figure out the total percentage of the asset that is depreciated the first year and double it. Each subsequent year, that same percentage is multiplied by the remaining balance to be depreciated. At some point, the value will be lower than the straight-line charge, at which point, the double declining method will be scrapped and straight line used for the remainder of the assets life (got all that?)

When using the double-declining-balance method, the salvage value is not considered in determining the annual depreciation, but the book value of the asset being depreciated is never brought below its salvage value, regardless of the method used. Depreciation ceases when either the salvage value or the end of the asset's useful life is reached. Since double-declining-balance depreciation does not always depreciate an asset fully by its end of life, some methods also compute a straight-line depreciation each year, and apply the greater of the two. This has the effect of converting from declining-balance depreciation to straight-line depreciation at a midpoint in the asset's life.

Calculating the Straight-Line Depreciation Rate

The first step to calculate depreciation using the double-declining balance method is to compute the asset's straight-line depreciation rate. Since the straight-line method expenses depreciation evenly over an asset's useful life as mentioned in Step 1, the formula to calculate the straight-line rate is as follows: 100 percent, or 1/the asset's useful life. Based on this formula, if an asset has a useful life of four years, the straight-line depreciation rate is 25 percent, or 1/4.

Calculating the Double-Declining Depreciation Rate

To determine the depreciation rate for the double-declining balance method, the straight-line depreciation rate is multiplied by 2. Using the formula for the straight-line rate for the fouryear asset in Section 2, the double-declining depreciation rate is 50 percent, simply calculated as follows: (1/4) x 2 = 50 percent

The Depreciation Journal Entry

The double-declining depreciation rate is multiplied each year on the carrying value of the asset -- the asset's total cost less its accumulated depreciation. Assuming that our asset has a total cost of $5,000, depreciation in the asset's first year will be calculated as follows: $5,000 x 50 percent = $2,500 The journal entry to record the asset's depreciation expense in the first year is as follows: (DR.) Depreciation expense 2,500 (CR.) Accumulated Depreciation 2,500

A machine was purchased on October 1, 2000 with purchase price 10,000,000 00. Estimated economic age for 5 years. Depreciation each year is calculated as follows: Calculate the depreciation percentages: 100%: 5 = 20%. Thus according to the magnitude of the percentage of double-declining method is 2 x 20% = 40%
Periode Akuntansi 2000 2001 2002 2003 2004 2005 Perhitungan Beban Penyusutan 3/12 x 40% x Rp10.000.000,00 = Rp1.000.000,00 40% x Rp9.000.000,00 = Rp 3.600.000,00 40% x Rp5.400.000,00 = Rp 2.160.000,00 40% x Rp3.240.000,00 = Rp 1.296.000,00 40% x Rp1.944.000,00 = Rp 777.600,00 9/12 x 40% x Rp1.166.400,00 = Rp349.920,00 Akumulasi Penyusutan Per 31 Desember Rp 1.000.000,00 Rp 4.600.000,00 Rp 6.760.000,00 Rp 8.056.000,00 Rp 8.833.600,00 Rp 9.183.520,00 Harga buku Mesin Per 31 Desember Rp 9.000.000,00 Rp 5.400.000,00 Rp 3.240.000,00 Rp 1.944.000,00 Rp 1.166.400,00 Rp 816.480,00