This document discusses the declining balance method for calculating depreciation. It explains that the declining balance method results in higher depreciation expenses in the early years of an asset's life and lower expenses in later years. The formula for calculating depreciation under this method is presented as Depreciation per annum = (Net Book Value - Residual Value) x Rate of depreciation %. An example is provided to demonstrate how depreciation expenses would decrease each year over a 3 year asset life. Finally, the advantages and disadvantages of different depreciation methods are briefly compared.

1. Depreciation Calculation Methods
(Declining Balance Method)
GROUP 9
MEMBERS:
WONG TIONG YUNG I14005802
GILBERT KONG I12001231

2. DEPRECIATION METHOD
• Allocating costs to the appropriate period.
• It isn’t part of the whole equation for figuring the
fair market value.
• It is the amount of money the company may
fetch when it sells any of the assets.

3. Declining Balance Method
• Technique of accelerated depreciation in amount
of depreciation that is charged to an asset
declines over time.
• It results in higher depreciation expense in the
earlier years of ownership.
• More depreciation charged during beginning of
life time; less charged during the end.

4. Formula and Calculation
• Declining balance method charges depreciation
at a higher rate in the earlier years of an asset.
• The amount of depreciation reduces as the life
of the asset progresses.
• Depreciation under declining balance method
may be calculated as follows:
Depreciation per annum = (Net Book Value -
Residual Value) x Rate of depreciation %

5. Formula and Calculation
Depreciation per annum = (Net Book Value - Residual Value) x Rate%
Where:
• Net Book Value = Asset's net value at the start of an
accounting period. Calculated by deducting the
accumulated depreciation from cost of fixed asset.
• Residual Value = Estimated scrap value at the end of the
useful life of asset. It’s expected to be recovered at the
end of an asset's useful life; no need to charge the portion
of cost equalling the residual value.
• Rate = Defined according to the estimated pattern of an
asset's use over its life term.

6. Example
• An asset has a useful life of 3 years.
• Cost of the asset is RM2,000.
• Residual Value is RM500.
• Rate of depreciation is 50%.
Depreciation expense for the three years will be as follows:

7. Example
• Depreciation for the last year of the asset's useful life is the
difference between net book value at the start of the period
and the estimated residual value.
• To ensure that depreciation is charged in full.
• Depreciation expense under declining balance method
progressively declines over the asset's useful life.
• It appropriate where an asset has a higher utility in the earlier
years of its life.

8. Comparison of Depreciation Methods
Methods Advantages Disadvantage
Straight Line • Easy to calculate.
• Useful where the pattern of
economic benefits are hard to
determine with precision.
• Suitable for depreciating
assets that provide similar
level of economic benefits
throughout their useful life.
• May not reflect the
true pattern of asset's
economic benefits.
Declining Balance • Appropriate where the
usefulness of an asset
declines over its useful life
• The rate of
depreciation selected
is subject to bias
Sum of the Year’
Digit
• Easier to understand.
• The effect of decrease in
depreciation expense
compared to reducing
balance method.
• More difficult to
calculate.

9. THANK YOU