The DB function with examples in Excel

The DB function in Excel is used to calculate the depreciation of an asset using the Fixed Declining Balance Method. Let’s break it down:

1. Basic Syntax:

   • The DB function has the following format:

     =DB(cost, salvage, life, period, [month])
     

   • Where:
     • cost: Initial cost of the asset.
     • salvage: Value of the asset at the end of depreciation.
     • life: Useful life of the asset (number of periods).
     • period: The specific period for which we calculate depreciation.
     • [month] (optional): Specifies how many months of the year are used in the first period calculation (default is 12).

2. Example 1: Depreciation Over 5 Years:

   • Let’s say we have an asset with an initial cost of $100,000 and a salvage value of $10,000 after 5 years.
   • We want to calculate depreciation for each year. The formula is:

     =DB(100000, 10000, 5, period)
     

   • For each year, change the period value (1 to 5). The results are:
     • Year 1: $18,000
     • Year 2: $14,400
     • Year 3: $11,520
     • Year 4: $9,216
     • Year 5: $7,373.60

3. Example 2: Depreciation Starting Mid-Year:

   • Suppose depreciation starts 6 months into Year 1.
   • Use the same data as before. The formula becomes:

     =DB(100000, 10000, 5, period, 6)
     

   • Results:
     • Year 1 (6 months): $9,000
     • Year 2: $14,400
     • Year 3: $11,520
     • Year 4: $9,216
     • Year 5: $7,373.60

Remember, the DB function uses fixed-declining balance method. It adjusts calculations based on the month argument and asset value over time.