

Depreciation function in Excel Using DB & VDB Functions 

The depreciation function in Excel
provides a tool
to businesses to calculate the depreciation of its assets which in turn
helps to finalize its profits and taxes for the financial year.


DB Function: Calculates the
depreciation of
an asset for a specified period. The depreciation of the first period
is deducted from the initial cost and becomes the cost for the second
period. Syntax: DB(cost, salvage, life, period, [month]) Cost: The initial cost of purchase of the capital equipment Salvage: The cash that will be generated after the equipment has been used over its life. Sometimes also called the scrap value. Life: Life or period of use of the equipment. Generally the income tax department has a list of categories of machinery and equipment which are defined for 'period of use' and also their depreciation is fixed per year. Countries have specific rules so you need to check with your chartered accountant. Period: The period for which you wish to calculate the depreciation. Companies may not purchase the equipment in the first month of the financial year. Therefore the depreciation calculation formula for the first period becomes: cost * rate * month / 12 VDB:Returns the depreciation of an asset for any period you specify, including partial periods, using the doubledeclining balance method or some other method you specify. VDB stands for variable declining balance. Syntax VDB(cost,salvage,life,start_period,end_period,factor,no_switch) Cost is the initial cost of the asset. Salvage is the value at the end of the depreciation (sometimes called the salvage value of the asset). Life is the number of periods over which the asset is depreciated (sometimes called the useful life of the asset). Start_period is the starting period for which you want to calculate the depreciation. Start_period must use the same units as life. End_period is the ending period for which you want to calculate the depreciation. End_period must use the same units as life. Factor is the rate at which the balance declines. If factor is omitted, it is assumed to be 2 (the doubledeclining balance method). Change factor if you do not want to use the doubledeclining balance method. 

No_switch is a logical value specifying whether to switch to straightline depreciation when depreciation is greater than the declining balance calculation. If no_switch is TRUE, Microsoft Excel does not switch to straightline depreciation even when the depreciation is greater than the declining balance calculation. If no_switch is FALSE or omitted, Excel switches to straightline depreciation when depreciation is greater than the declining balance calculation. All arguments except no_switch must be positive numbers. The following Excel training video shows how to calculate the depreciation of an asset. 



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