The double declining method is called an accelerated depreciation method because more depreciation expense is recorded in the early years when compared to the later years. The following steps are required to use the double declining method:
- Determine the straight line rate of depreciation
- Double the straight line rate by multiplying by 2
- Multiply the double declining rate by the book value of the asset at the beginning of the period.
Example:
Uncle Joe bought an equipment for $24,000. Uncle Joe estimates the useful life to be four years with a salvage value of $4,000.
- Determine the straight line rate = ¼ = 25%
- Double the straight line rate = 25% * 2 = 50%
- Multiply the double declining rate by book value ( do not go below cost minus salvage value)
| Year | Book Value at beginning of the year | Double declining rate | Annual Depreciation Expense | Accumulated depreciation |
| 2013 | 24,000 | 50% | 12,000 | 12,000 |
| 2014 | 24,000 minus 12,000 equals 12,000 | 50% | 6,000 | 18,000 |
| 2015 | 24,000 minus 18,000 equals 6,000 | 50% | 3,000 2,000 | 20,000 |
In double declining balance, you cannot depreciate below the cost minus salvage value. In this case the salvage value was $4,000 and the cost was $24,000, so you have to stop at 20,000 (24,000 minus 4,000).