## Definition of Double Declining Balance Method of Depreciation

The double declining balance method of depreciation, also known as the 200% declining balance method of depreciation, is a form of accelerated depreciation. This means that compared to the straight-line method, the depreciation expense will be faster in the early years of the asset's life but slower in the later years. However, the
*
total
*
amount of depreciation expense during the life of the assets will be the same.

The "double" means 200% of the straight line rate of depreciation, while the "declining balance" refers to the asset's
*
book value
or carrying value
*
at the beginning of the
accounting period
. Since book value is an asset's cost minus its
accumulated depreciation
, the asset's book value will be decreasing when the
contra asset account
Accumulated Depreciation is credited with the depreciation expense of the accounting period.

## Example of Double Declining Balance Depreciation

Let's assume that a retailer purchases fixtures on January 1 at a cost of $100,000. It is expected that the fixtures will have no
salvage value
at the end of their useful life of 10 years. Under the
*
straight-line method
*
, the 10-year life means the asset's annual depreciation will be 10% of the asset's cost. Under the
*
double declining balance method
*
the 10% straight line rate is doubled to 20%. However, the 20% is multiplied times the fixture's
*
book value at the beginning of the year
*
instead of the fixture's original cost.

At the beginning of the first year, the fixture's book value is $100,000 since the fixtures have not yet had any depreciation. Therefore, under the double declining balance method the $100,000 of book value will be multiplied by 20% and will result in $20,000 of depreciation for Year 1. The journal entry will be a debit of $20,000 to Depreciation Expense and a credit of $20,000 to Accumulated Depreciation.

At the beginning of the second year, the fixture's book value will be $80,000, which is the 游戏电竞线上外围APP v5.2 cost of $100,000 minus the accumulated depreciation of $20,000. When the $80,000 is multiplied by 20% the result is $16,000 of depreciation for Year 2.

At the beginning of Year 3, the asset's book value will be $64,000. This is the 游戏电竞线上外围APP v5.2 fixture's cost of $100,000 minus its accumulated depreciation of $36,000 ($20,000 + $16,000). The book value of $64,000 multiplied by 20% is $12,800 of depreciation expense for Year 3.

At the beginning of Year 4, the asset's book value will be $51,200. Therefore, the book value of $51,200 multiplied by 20% will result in $10,240 of depreciation expense for Year 4.

At the beginning of Year 5, the asset's book value will be $40,960. This is the 游戏电竞线上外围APP v5.2 amount to be depreciated over the remaining 6 years. In year 5, companies often switch to straight-line depreciation and debit Depreciation Expense and credit Accumulated Depreciation for $6,827 ($40,960/6 years) in each of the six remaining years.