=SLN(cost, salvage, life) | =DDB(cost, salvage, life, period, [factor]) For straight-line annual depreciation, use =SLN(Cost, Salvage_Value, Useful_Life). For accelerated double declining balance in a specific year, use =DDB(Cost, Salvage_Value, Useful_Life, Year_Number).
How to Calculate Asset Depreciation in Excel (SLN, DB, and DDB Methods)
Fixed asset accounting requires calculating how equipment, fleet vehicles, servers, and leasehold improvements lose value over their useful lifespan for GAAP financial reporting and IRS tax deductions.
Excel provides built-in functions for all primary depreciation methods:
- Straight-Line (
SLN): Equal depreciation expense each year. - Fixed Declining Balance (
DB): Accelerated depreciation at a fixed percentage. - Double Declining Balance (
DDB): Twice the straight-line rate, front-loading tax deductions.
1. Straight-Line Depreciation (SLN)
The simplest and most widely used accounting method:
=SLN(cost, salvage, life)$$\text{Annual Expense} = \frac{\text{Cost} - \text{Salvage Value}}{\text{Useful Life in Years}}$$
Example:
Company buys delivery vans for $80,000 with an estimated salvage value of $10,000 after 5 years:
=SLN(80000, 10000, 5)- Annual Depreciation:
$14,000.00 / yearfor all 5 years.
2. Double Declining Balance Depreciation (DDB)
Accelerated depreciation where the asset writes off the most expense in Year 1:
=DDB(cost, salvage, life, period, [factor])period: The specific year being calculated (1, 2, 3...).factor(Optional): Rate multiplier. Defaults to2for Double Declining.
Comparison Schedule: SLN vs. DDB ($80,000 Asset, $10,000 Salvage, 5 Years)
| Year | Beginning Book Value | Straight-Line (SLN) | DDB Expense Formula | DDB Depreciation | DDB Ending Book Value |
|---|---|---|---|---|---|
| Year 1 | $80,000.00 | $14,000.00 | =DDB(80000, 10000, 5, 1) | $32,000.00 | $48,000.00 |
| Year 2 | $48,000.00 | $14,000.00 | =DDB(80000, 10000, 5, 2) | $19,200.00 | $28,800.00 |
| Year 3 | $28,800.00 | $14,000.00 | =DDB(80000, 10000, 5, 3) | $11,520.00 | $17,280.00 |
| Year 4 | $17,280.00 | $14,000.00 | =DDB(80000, 10000, 5, 4) | $6,912.00 | $10,368.00 |
| Year 5 | $10,368.00 | $14,000.00 | =DDB(80000, 10000, 5, 5) | $368.00 | $10,000.00 |
| Total | $70,000.00 | $70,000.00 |
Notice that in Year 5, DDB automatically limits depreciation to $368.00 so that ending book value hits the exact $10,000.00 salvage floor.
3. Sum-of-Years’ Digits (SYD) Method
Another accelerated schedule based on decreasing fractions of the remaining asset lifespan:
=SYD(cost, salvage, life, period)- Year 1:
=SYD(80000, 10000, 5, 1)$\rightarrow$$23,333.33 - Year 2:
=SYD(80000, 10000, 5, 2)$\rightarrow$$18,666.67 - Year 3:
=SYD(80000, 10000, 5, 3)$\rightarrow$$14,000.00 - Year 4:
=SYD(80000, 10000, 5, 4)$\rightarrow$$9,333.33 - Year 5:
=SYD(80000, 10000, 5, 5)$\rightarrow$$4,666.67
4. Partial-Year Depreciation with Variable Declining (VDB)
If you purchase an asset midway through the tax year (e.g. September 1st, meaning only 4 months of use in Year 1), use VDB:
=VDB(cost, salvage, life, start_period, end_period, [factor], [no_switch])For 4 months in Year 1:
=VDB(80000, 10000, 5, 0, 4/12)- Returns:
$10,666.67for Year 1 partial depreciation.
Frequently Asked Questions
What is Salvage Value?
Salvage value (or residual value) is the estimated book value of an asset at the end of its useful life after all depreciation has been recognized.
When should businesses choose Accelerated (DDB) over Straight-Line (SLN) depreciation?
Accelerated depreciation recognizes higher tax-deductible expenses in earlier years, reducing taxable income upfront. It is commonly used for technology, vehicles, and machinery that lose value rapidly.
Why does DDB stop depreciating before reaching zero?
The DDB function automatically caps total accumulated depreciation so that the asset's ending book value never falls below its specified salvage value.