Instructions for Declining-Balance Depreciation Schedule
MJC Revised 1/2012 Page 1
Love Thy Pets Inc.,
Depreciation Schedule – Declining Balance
For 5 Year Asset
Cost of Asset $20,000
Residual Value 5,000
Useful Life 5 Years A B C D E F G H
End
of
year
Cost of
Asset
Accumulated
depreciation
at beginning
of year
Book value at
beginning of
year (Cost –
Accumulated
depreciation)
Depreciation
Rate
1/Life X 2
Annual
Depreciation
(Book value at
beginning of
year X Rate)
Accumulated
depreciation
at end of year
Book value at
end of year (Cost
– Accumulated
depreciation)
1 $20,000 0 $20,000 40% $8,000 $ 8,000 $12,000
2 $20,000 $ 8,000 $12,000 40% $4,800 $12,800 $ 7,200
3 $20,000 $12,800 $ 7,200 40% $2,200 $15,000 $ 5,000
4 $20,000 $15,000 $ 5,000 40% 0 $15,000 $ 5,000
5 $20,000 $15,000 $ 5,000 40% 0 $15,000 $ 5,000
Systematic Instructions
Always start with the three-line header, which in this case includes the name of the corporation,
the title of the form, and the assets useful life.
1. On the first line place the title “Cost of Asset” and then the dollar value of the asset.
2. On the second line place the title “Residual Value” and the dollar value of the asset at the
end of its useful life to the corporation.
3. On the third line place the title “Useful Life” and the amount of years the asset will be of
value to the corporation. Please take note that an asset does not cease to exist just because
it is no longer useful to the corporation.
4. On the fourth line label the columns alphabetically.
5. On the fifth line use the following labels
End
of
year
Cost of
Asset
Accumulated
depreciation
at beginning
of year
Book value at
beginning of
year (Cost –
Accumulated
depreciation)
Depreciation
Rate
1/Life X 2
Annual
Depreciation
(Book value at
beginning of
year X Rate)
Accumulated
depreciation at
end of year
Book value at
end of year (Cost
– Accumulated
depreciation)
Instructions for Declining-Balance Depreciation Schedule
MJC Revised 1/2012 Page 2
6. Column “A” list down the number of years in the assets projected useful life.
7. Column “B” list the original cost of the asset in each year of the assets useful life.
8. Column “C” the first year will be $0 because the asset has not been used but thereafter the
value for this column will be taken from column “G” for the prior year.
9. Column “D” the first year the book value at the beginning of the year will be the original cost of
the asset but thereafter book value will be taken from column “H” for the prior year.
10. Column “E” is the deprecation rate. The formula for the rate is 1 divided by the number of years
in the useful life of the asset time two for double declining balance. Please note that some
assets are depreciated at less than twice the straight line rate. One divided by the number of
years in the useful life of an asset is called the straight line rate. The rate will be the same for
every year of the assets useful life.
11. Column “F” value is arrived at by multiplying the dollar value in column “D” time the rate in
column “E.” In years four and five of this asset the amount of annual depreciation yield by the
formula will exceed the allowed total amount of depreciable cost so no depreciation can be
taken in those years. In year three the formula will yield more annual depreciation than can be
taken so only the dollar amount that brings the accumulated depreciation up to the maximum
allowable depreciable cost can be allotted for that year. Subtract the residual value from the
original cost to get the depreciable cost for an asset.
12. Column “G” is the sum total of all the annual depreciation taken up to the current period. Year
one accumulated depreciation will be the same as the annual depreciation since no prior
depreciation has been taken. Thereafter the current year’s depreciation will be added to the
prior year’s accumulated depreciation to arrive at the current year’s accumulated depreciation.
Note in years four and five that the accumulated depreciation does not change since it has
reached the maximum allowable depreciable cost in year three.
13. Column “H” is arrived at by subtracting the value in column “G” accumulated depreciation from
the value in column “B” which is the cost of the asset. Note that in year three that the residual
value for the asset has been reach so no more depreciation can be taken since an asset cannot
be depreciated below its residual value.