AMORLINC Excel

What Is AMORLINC Excel Function?

The AMORLINC is an Excel function used to calculate the linear depreciation of an asset over a specified period. It helps businesses track the decrease in the value of their assets over time for accurate financial reporting and budgeting decisions. The function considers the start and end dates of the depreciation period, ensuring precise calculations. By using AMORLINC, financial professionals can efficiently manage assets and make better decisions.

Let us look at the example to understand how the AMORLINC Excel function works. In this example, we have the cost of a product and the date of purchase as April 1, 2023. To find its depreciation over a fixed period, apply the following formula.

=AMORLINC(B1,B2,B3,B4,B5,B6,0)

We get a result of $4,800, as shown below.

What Is AMORLINC Excel Function?

AMORLINC is an Excel function that calculates the decrease in value of an asset over time using linear depreciation. This helps businesses track their assets’ value accurately for financial reporting and budgeting.
The syntax of the AMORLINC Excel function is as follows;

=AMORLINC(cost, date_purchased, first_period, salvage, period, rate, [basis])

Salvage value is the amount an asset is estimated to be worth at the end of its useful life. It helps determine the depreciation expense of the asset over time.
Microsoft recommends using date functions instead of strings for the date_purchased and first_period arguments.
The AMORLINC function is similar to the AMORDEGRC function but applies a depreciation coefficient based on the asset’s lifespan. To calculate depreciation without a coefficient, use the AMORDEGRC function.

Syntax

Cost – (Mandatory) This is the initial cost of the asset.
Date_purchased – (Mandatory) This is the purchase date of the asset.
First_period – (Mandatory) This is the end date of the first period.
Salvage – (Mandatory) This is the Salvage value is the remaining worth of an asset after it has been fully depreciated.
Period – (Mandatory) This is the specific time frame used to calculate depreciation.
Rate – (Mandatory) This is the rate of depreciation of the asset.
Basis – (Optional) This specifies the day count basis that will be utilized.

Day Count Basis Basis	Day Count Basis
0	US(NASD) 30/360
1	Actual/actual
2	Actual/360
3	Actual/365
4	European 30/360

How To Use AMORLINC Function in Excel?

To use the AMORLINC function in Excel, simply follow these steps.

#1 – Access from the Excel ribbon

Select an empty cell and go to the Formulas tab.
Here, in the Excel ribbon, select “Financial.”
Select the AMORLINC option from the drop-down menu.
Input values for the arguments in the Function Arguments window, which opens. Click OK to proceed.

#2 – Enter the worksheet manually

Step 1: To assign a vacant cell for output using the AMORLINC Excel function, input =AMORLINC() into the desired cell. Alternatively, start typing =A and double-click on AMORLINC from the list of suggestions in Excel.

Step 2: Enter the required arguments and close the braces. To achieve the desired outcome, press the Enter key.

Examples

Let us look at some examples of how to implement the AMORLINC Excel function.

Example #1

This example demonstrates how to calculate the first-period depreciation of an asset that was purchased for $2,500 on 20/04/2022. The asset has a salvage value of $200 and a depreciation rate of 15%. The depreciation is calculated using the AMORLINC Excel function.

Step 1: Select cell B8 and enter the AMORLINC formula. Here, we are giving the reference values of the data stored in the table. Remember, the dates should be in the DATE format rather than as text, as it could lead to problems in the calculation.

Else when using the date values in the formula, you may use the DATE excel function.

=AMORLINC(B1,B2,B3,B4,B5,B6,1)

Step 2: Press Enter. The outcome is showcased in cell B8.

This formula calculates the depreciation of an asset worth $2,500 over a specific period from April 20, 2022, to December 31, 2022, showing a depreciation amount of $375.

Example #2

An asset was purchased for $45,000 on May 7, 2021, with a depreciation rate of 10%. The asset’s value will start at $1000 and decrease by 10% each year. The asset will be fully depreciated when its value reaches $1000 from period 0 to 4. Let us calculate the depreciation for each accounting period.

Let’s start the calculation by entering the values as prescribed below;

Step 1: Insert the formula to calculate the depreciation of the asset in cell E2. The complete formula is =AMORLINC($B$1,$B$2,$B$3,$B$4,D2,$B$5,3)

Step 2: The depreciation value at the end of each accounting period is attained in cells E2 to E6.

Example #3

The following example illustrates a scenario where the #NUM! Error can occur when using the AMORLINC Excel function. We have entered the details of the purchase of an asset in the table below. If you observe, the date of purchase is later than the end of the first-period date.

To calculate the result, enter the formula =AMORLINC(B1,B2,B3,B4,B5,B6) into the designated cell B7.

You can observe the #NUM! error arises when the purchase date entered is later than the First Period date, which is not a valid scenario.

Important Things To Note

Depreciation is an accounting method that spreads out the cost of a tangible asset over its useful life. It follows the linear depreciation method. It is particularly beneficial for those businesses seeking to manage asset depreciation systematically.
The optional basis argument allows for the specification of a different day-count basis.
The #NUM! error occurs if the date purchased is after the first period, if the salvage value is higher than the cost, or if invalid numbers are entered for the salvage, period, rate, or basis arguments. It includes negative values for salvage, periods, or rates and entering a basis number other than 0, 1, 2, 3, or 4.
The #VALUE! error occurs if the date purchased or first-period arguments are not valid Excel dates or if any of the arguments are non-numeric.

Frequently Asked Questions (FAQs)

1. What is the difference between the AMORLINC and AMORDEGRC functions in Excel?

2. How does the AMORLINC function handle irregular periods or different payment frequencies?

The AMORLINC function is used for the calculation of interest payments. The function handles irregular periods or different payment frequencies by adjusting accordingly to ensure accuracy and consistency in the calculations. By utilizing this function, users can easily calculate interest payments even when there are irregularities in the payment schedule. This makes it an invaluable tool for financial professionals who need to deal with varying payment frequencies or irregular periods in their calculations.

The AMORLINC function streamlines the process and ensures that accurate results are achieved every time, saving valuable time and minimizing the risk of errors in complex financial calculations.

3. What are the scenarios where AMORLINC has limitations?

In cases of loans and investments with a variable interest rate, AMORLINC may not prove to be useful. Functions like XIRR are useful in such cases. When data is not currency related, you cannot use the AMORLINC formula. In such cases, you may use the DATEDIF or CONVERT formula before using AMORLINC.

Download Template

This article must help us understand the AMORLINC Excel Function’s formula and examples. You can download the template here to use it instantly.

AMORLINC-Excel Download

AMORLINC Excel