As per accounting, depreciation is the reduction in the value of any asset. Ms excel software has two good formulas for calculating depreciation. For this, you should know the initial cost of asset, salvage value and useful life of asset if you want to calculate the depreciation under straight line method. If you want to calculate depreciation under diminishing balance method, you have to mention the period and months. If asset is bought in the beginning of any year, months must be 12 for every year's depreciation under declining or diminishing balance method.
Following are the steps for calculating the depreciation in excel:
1. To Write the Figure of initial cost, salvage value and useful life of asset
For example, initial value of asset may be $ 5000, salvage value or scrap value will be $ 3500 in case straight line method and $3645 in declining balance method and useful life of asset may be 3 years.
2. To Use the formula SLN
=SLN(initial value; salvage value; useful life)
= SLN(5000; 3500; 3)
Answer will be $ 500
2. To Use the formula DB
=DB(initial value; salvage value; useful life; period; month)
=DB(5000; 3645; 3; 1; 12)
Answer will be $ 500
Important Note :
1. If we have not bought asset in the beginning of year we have bought asset in the end of 3rd month, we will show 9 instead of writing 12 in the calculation of depreciation under declining method.
2. If we have to calculate the second year's depreciation, we will just show period 2 instead of 1 in DB formula.
3. you can also use function option in the insert. In function, you can use financial, you can choose DB or SLN as per your requirement.
Following are the steps for calculating the depreciation in excel:
1. To Write the Figure of initial cost, salvage value and useful life of asset
For example, initial value of asset may be $ 5000, salvage value or scrap value will be $ 3500 in case straight line method and $3645 in declining balance method and useful life of asset may be 3 years.
2. To Use the formula SLN
=SLN(initial value; salvage value; useful life)
= SLN(5000; 3500; 3)
Answer will be $ 500
2. To Use the formula DB
=DB(initial value; salvage value; useful life; period; month)
=DB(5000; 3645; 3; 1; 12)
Answer will be $ 500
Important Note :
1. If we have not bought asset in the beginning of year we have bought asset in the end of 3rd month, we will show 9 instead of writing 12 in the calculation of depreciation under declining method.
2. If we have to calculate the second year's depreciation, we will just show period 2 instead of 1 in DB formula.
3. you can also use function option in the insert. In function, you can use financial, you can choose DB or SLN as per your requirement.
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