Question

Is there a function which describes book value with respect to time, BV(t), for SOYD depreciation? Also is there an equivalent function which describes double declining balance?

Answer 1

The double declining balance method of depreciation refers to a increased form of depreciation and is also known as 200%declining balance method of depreciation. This implies that the expense  of depreciation will be faster in the early life of the asset, but in the later years it will be slower'.Double' refers to 200% of the rate of straight line depreciation and 'declining balance' refers to book value ie the carrying value of the asset when  the accounting year starts.This is a SOYD method.SOYD means sum- of -years digits method and is an accelerated depreciation method.Due to the time value of money , an increased depreciation method is required in a business which is making profit as it delays the payment of taxes.The book value of an asset depreciates over time and with double depreciation rate ,charges drop continuously.The balance of the book value is at a point of time ,reduced to the asset's salvage value. The excel equivalent function for double declining balance method is DDB( cost. life , salvage)will calculate depreciation of the period that is selected.