What is DDB function in Excel?
DDB function is one of the Financial functions in Microsoft Excel that returns the depreciation of an asset for a specified period using the double-declining balance method or some other method you specify.
Syntax of DDB function
DDB(cost, salvage, life, period, [factor])
The DDB function syntax has the following arguments:
- Cost: The initial cost of the asset.
- Salvage: The value at the end of the depreciation (sometimes called the salvage value of the asset). This value can be 0.
- Life: The number of periods over which the asset is being depreciated (sometimes called the useful life of the asset).
- Period: The period for which you want to calculate the depreciation. Period must use the same units as life.
- Factor (Optional): The rate at which the balance declines. If factor is omitted, it is assumed to be 2 (the double-declining balance method).
Important: All five arguments must be positive numbers.
DDB formula explanation
- The double-declining balance method computes depreciation at an accelerated rate. Depreciation is highest in the first period and decreases in successive periods. DDB uses the following formula to calculate depreciation for a period:
Min( (cost – total depreciation from prior periods) * (factor/life), (cost – salvage – total depreciation from prior periods) )
- Change factor if you do not want to use the double-declining balance method.
- Use the VDB function if you want to switch to the straight-line depreciation method when depreciation is greater than the declining balance calculation.
Example of DDB function
Steps to follow:
1. Open a new Excel worksheet.
2. Copy data in the following table below and paste it in cell A1
Note: For formulas to show results, select them, press F2 key on your keyboard and then press Enter.
You can adjust the column widths to see all the data, if need be.
|10||Lifetime in years|
|=DDB(A2,A3,A4*365,1)||First day’s depreciation, using double-declining balance method. Default factor is 2.||$1.32|
|=DDB(A2,A3,A4*12,1,2)||First month’s depreciation.||$40.00|
|=DDB(A2,A3,A4,1,2)||First year’s depreciation.||$480.00|
|=DDB(A2,A3,A4,2,1.5)||Second year’s depreciation using a factor of 1.5 instead of the double-declining balance method.||$306.00|
|=DDB(A2,A3,A4,10)||Tenth year’s depreciation. Default factor is 2.||$22.12|