declining balance depreciation definition

declining balance depreciation

Method of computing depreciation in which the written down or book value (purchase price - accumulated depreciation) of a capital asset is reduced by a fixed percentage rate. This method results in larger depreciation amounts in the earlier years of an asset's useful life and progressively lower amounts in later years, and is employed where the usage of an asset remains generally uniform despite the asset's age. Formula: 1- (Residual value ÷ Cost)^1/N where N is the number of years in the asset's estimated useful life. Also called diminishing balance depreciation, and reducing balance depreciation. See also straight line depreciation.

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