# Reducing Balance Depreciation Calculator

## What does it do?

This reducing balance depreciation calculator works out the accumulated depreciation of an asset using the reducing balance method.

The reducing balance method is often referred to as the declining balance method which is more fully discussed in our declining balance depreciation tutorial.

## Formula

The calculator uses the future value of a lump sum formula as shown below:

`FV = PV x (1 + i)n`

Full details of the formula can be seen at our future value of a lump sum formula page.

## Instructions

The Excel reducing balance depreciation calculator, available for download below, is used to compute the accumulated depreciation by entering details relating to the asset cost (PV), depreciation rate (i) and the number of periods (n). The calculator is used as follows: ### Step 1

Enter the asset cost (PV). This is the original cost of the asset at the start of period 1.

### Step 2

Enter the depreciation rate (i). The depreciation rate is the rate used to depreciate the asset from the beginning of period 1 (today) to end of period n. The rate should be for a period, so for example, if the period is a year, then the rate should be the yearly rate.

As the value of the asset is reducing over time, the depreciation rate is entered as a negative value. For example, if the depreciation rate is 255 this is entered as -25%.

### Step 3

Enter the number of periods (n). The number of periods is entered. A period can be any term (month, year etc), but must be consistent with the depreciation rate provided (see step 2)

### Step 4

The reducing balance depreciation calculator works out the net book value (FV) of the asset at the end of period n, and also calculates the accumulated depreciation on the asset for the n periods.