# DDB Excel

## What is the DDB Excel Function?

The DDB Excel function, which stands for Double Declining Balance Depreciation, is designed to facilitate the calculation of an asset’s depreciation over time. The function is particularly applicable to assets that lose their value at a faster rate during the initial years of use and gradually decrease in depreciation amount after that.

In the example below, we will demonstrate the application of the DDB Excel function to calculate asset depreciation. Here, the asset cost is \$10,000; its salvage value is \$100; the life of an asset is 2 years, and we are calculating the depreciation for one year.

To begin, please enter the following formula in cell B1 and press Enter.

=DDB(10000,100,2,1)

The resulting depreciation value will be displayed in cell B1.

###### Key Takeaways
• The Excel DDB function is used to determine the depreciation of an asset using the double declining balance method for a particular period.
• It is used to determine the depreciation expenses accurately by considering factors like the asset’s cost, salvage value, the estimated residual value at the end of its useful life, duration of use, and the method for calculating depreciation.
• Usually, the depreciation is highest in the first period and decreases gradually in the other periods.
• The referencing in depreciation calculations should be done correctly for the intended periods, as using incorrect periods can lead to errors.

### Syntax

Cost – (Mandatory) It is the initial cost of an asset.

Salvage – (Mandatory) It is the final asset value after depreciation.

Life – (Mandatory) It is the depreciation period for assets.

Period – (Mandatory) It is the period for calculating depreciation.

Factor – (Optional) It is the rate at which the balance declines and is determined by the default value of 2 unless otherwise specified.

### How To Use DDB Function in Excel?

There are two ways in which we can used the DDB function. To effectively utilize it either way, follow these steps.

#### #1 – Access from the Excel ribbon

Step 1: Choose an empty cell, go to the “Formulas” tab and click on it.

Step 2: Select the “Financial” option from the menu.

Step 3: Select “DDB” from the drop-down menu.

Step 4: A window called “Function Arguments” appears. Here, enter the values of “cost,” “salvage,” “life,” “period,” and “factor.” Select OK.

#### #2 – Enter the worksheet manually

Step 1: Select an empty cell and type “=DDB().” Or you can type “=D” and double-click the DDB function. Enter the values for the parameters.

Step 2: Press the “Enter” key to get the result.

### Examples

#### Example #1 – When Argument Factor is Omitted

In the following example, we will explore and apply the concept of the DDB Excel function to calculate the depreciation over three years yearly for an asset when the ‘factor’ is omitted. The data within the provided table is organized as follows:

• – Row 2 contains the initial cost of the asset.
• – Row 3 contains the salvage value.
• – Row 4 contains the useful life of the asset.
• – Row 5 contains the period over which depreciation is calculated.
• – Row 7 is where we will print the depreciation value of the asset.

To calculate the desired output, please follow these steps.

Step 1: Let us enter the formula in cell B7, as shown below.

=DDB(B2,B3,B4,B5).

Step 2: Press the Enter key. The declining balance depreciation at the end of first year is calculated.

Step 3: Now, enter the following formulas in cell C7 and D7, respectively, to calculate the declining balance depreciation over the second and third year.

=DDB(C2,C3,C4,C5)

=DDB(D2,D3,D4,D5)

#### Example #2 – When the argument factor is another number

In this example, let us calculate the depreciation of a small machine over two years, for a given factor. Look at the following table.

Here, we are going to calculate the depreciation value of the machine over the years one and two with a triple declining balance depreciation (factor), as shown in the table.

Step 1: Enter the formula below in cell B7. This formula helps us calculate the depreciation value of the machine at factor value, 3 after a year.

=DDB(B2,B3,B4,B5,B6).

Step 2: Press the Enter key. You get a value of \$ 30,000. This is the depreciation value at the end of the first year with factor 3.

Step 3: Now, using the same DDB Excel formula, we can calculate the depreciation at the end of two years. Enter the following formula in cell C7 and press Enter.

=DDB(C2,C3,C4,C5,C6)

#### Example #3 – Calculate the Depreciation value of an item during its life.

In this example, we’re going to see how it can help us calculate the depreciation value of an item, a car in this case, during its life.

Let us assume that we have a second-hand car valued at \$40,000 with an estimated salvage value of \$4,000. The life of the car is determined to be 6 years, and we want to calculate the depreciation value for each year till its useful life. Let us not give any factor value, assuming the default value 2.

To calculate the desired result, follow these steps:

Step 1: Since the values of cost, salvage, life are fixed, we can use the absolute cell reference. For the period 1, enter the following formula in cell E4.

=DDB(\$B\$1,\$B\$2,\$B\$3,B4)

Step 2: Press enter to get the depreciation value at the end of year 1. Now, drag the formula from cell E4 till E9 to get the values for all the years in its useful life.

Thus, you can see how the car’s value depreciates over its useful years.

#### Example #4 – Calculate the Depreciation value of an item in its first year

In this example, we will explore how to calculate the depreciation value of an item in its first year. Let’s consider a machine valued at \$3,00,000 with an estimated salvage value of \$50,000. The machinery’s useful life is determined to be 4 years. Let us calculate the depreciation expense for the first year.

Step 1: Enter the formula for the double declining balance depreciation as shown below in cell B7.

=DDB(B2,B3,B4,B5)

Step 2: Press Enter. You will get the depreciation value in the first year.

### Important Things To Note

• A #NUM! error can occur when the provided parameters for DDB Excel contain a negative value.
• The accuracy of decimals in calculations depends on the settings. Excel automatically round the calculated depreciation expense.
• Using the double declining balance method, you will observe that the value of the asset declines significantly over the first period in its lifetime and by smaller amounts in the subsequent periods.
• DDB Excel function is useful for calculating the depreciation on a fixed asset.

### Frequently Asked Questions (FAQs)

What is the purpose of using the DDB Excel Function?

The purpose of the DDB Excel function is to calculate the depreciation of an asset over time using the declining balance method. This method assumes the depreciation of the value of an asset is high in its initial periods and then gradually slows down. It facilitates precise depreciation calculations for informed financial planning and evaluation purposes. It is particularly helpful in accelerating depreciation expenses for tax purposes.

Example

In this example, we will illustrate the practical application of the DDB Excel function for calculating asset depreciation for 8 years of life. Input the following formula into cell B6: =DDB(B2,B3,B4,B5). You will get the depreciation value at the end of 8 years as shown in cell B6.

Are there any limitations or considerations to keep in mind when using the DDB function?

Some limitations of using the DDB function are as follows;

• This method assumes the asset’s depreciation is evaluated over the full life of the asset, which may not always reflect the actual wear and tear of the asset.
• The function does not take any salvage value of the asset, which would be inaccurate calculations in cases where there is a residual value.
• This method allocates more depreciation expense at the beginning of an asset’s life; it results in lower income during those periods compared to other depreciation methods.
• The function ensures all necessary inputs such as cost, salvage value, useful life, and period are inputted correctly to avoid any miscalculations.

Where is the DDB function in Excel?

To locate the in-built DDB function, go to the “Formulas” tab, select the “Financial” option from the drop-down menu and select DDB. A window called “Function Arguments” appears. Enter the relevant values for the arguments and press OK.

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

Guide to DDB Excel. Here we learn how to use DDB Function in Excel with step by step examples and a downloadable template. You can learn more from the following articles –