Chapter 11 Video: Types of Depreciation


Transcript Area

This Excel tutorial covers the topic of depreciation. Specifically, straight line, declining balance and sum of years digits. The basic information you need to do these types of depreciation is under our information block. Its Cost, Salvage and Life. To do straight line depreciation for this scenario, the formula is equals SLN. Notice we need Cost, Salvage and Life. Our Cost is in B2. Our Salvage is in B3. And our Life is in B4. And you get $1,857 and some change. Straight line depreciation uniform. So over this life of the product It has the same depreciation every year, which is the $1857.14.

But whenever you go to these other two types, declining balance or some of years digits, it's different for each year because of the amount of money you can take off at the start, or it changes each year basically. So when you're doing declining balance and sum of years digits, you're going to get a different answer depending on which year you're looking at. So for instance to do declining balance, that is equals DDB and notice it says returns depreciation of an asset. Okay, so, you know, you're on the right one. Its Cost was in B2, the Salvage was in B3. Notice it asks for Life, was seven years, that's B4. Now it's going to ask for what period. Well, since it can be different for each year, I set up a little table over here so I can show you the differences. So if you're in Year 1 that is going to have a different value than if we looked at year 5. So let's first look at first date year 1. Now notice that also asked for a factor. In Excel its default factor is 2 for 200%. If you don't want to use that you could put in a different factor such as 1.5 for 150%.

I'm just going to go for the default. Notice that you will get $4,285 and some change. If I change the year from E4 to say E8, which makes it 5, notice how your value changes way down to just a little over $1100. So realize that..that you're going to get different values depending on what year you select for declining balance. The same thing happens on some of year’s digits. For this one it equals SOYD. Don't have the right one. Let's go to insert function. Make sure I find it. Let's type in sum of years digit and it's SYD, okay. And I'm going to remove the function argument here and go equals SYD. It asks for Cost which was B2, the Salvage which is B3, the overall Life was seven years. And then which period am I asking for? Again, let's look at Year 1. Notice I get 32.50. If I go back and change this to year 5, which is in E8, notice I will get a different answer because you get to take a different percentage depending on what year you are in the process. So in this Excel tutorial, I've shown you three types of depreciation, straight kline..straight line, declining balance and sum of years digits.