Double Declining Depreciation
Accelerated depreciation of an asset.
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Front-loads expense
How it works
Double declining depreciation is a form of accelerated depreciation that charges a larger expense in the early years of an asset’s life and smaller amounts later. It is based on a constant declining percentage of book value, and the rate is doubled compared with straight-line depreciation, which is why the formula uses 2/n. This works well for assets that lose economic value quickly at first, such as vehicles or technology, because their usefulness and resale value often fall fastest in the early periods.
When to use it
Use this method when an asset’s benefits are expected to be consumed more heavily in its early years or when its market value drops rapidly soon after purchase. It is common in accounting for equipment, machinery, vehicles, and other depreciable assets where accelerated expense recognition is appropriate.
Worked example, step by step
Asset cost = $50,000 Useful life n = 5 years Book value at start of Year 1 = $50,000 Step 1: Find the depreciation rate D = (2 / n) × BV D = (2 / 5) × 50,000 D = 0.4 × 50,000 D = $20,000 Step 2: Update the book value after Year 1 New book value = 50,000 - 20,000 = $30,000 Step 3: Find Year 2 depreciation using the new book value D = (2 / 5) × 30,000 D = 0.4 × 30,000 D = $12,000 So the double declining depreciation expense is $20,000 in Year 1 and $12,000 in Year 2, showing how the expense declines as the book value falls.
Common mistakes to avoid
- Using the original cost every year instead of the current book value
- Forgetting that the depreciation rate is doubled from straight-line, so the rate is 2/n
- Continuing depreciation past the asset’s salvage value without checking the ending book value
Did You Know?
Double-declining depreciation front-loads the expense, matching assets like cars that lose value fastest when new.
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