### INTRODUCTION

*DB function comes under the FINANCIAL FUNCTIONS category in Excel.*

*DB returns the depreciation of an asset for a specified period using the fixed-declining balance method.*

## PURPOSE OF DB IN EXCEL

*DB returns the depreciation of an asset for a specified period using the fixed-declining balance method.*

## PREREQUISITES TO LEARN DB

THERE ARE A FEW PREREQUISITES WHICH WILL ENABLE YOU TO UNDERSTAND THIS FUNCTION IN A BETTER WAY.

- Basic understanding of how to use a formula or function.
- Basic understanding of rows and columns in Excel.
- Some information about the financial terms is an advantage for the use of such formulas.
- Of course, Excel software.

Helpful links for the prerequisites mentioned above

What Excel does? How to use formula in Excel?

## SYNTAX: DB FUNCTION IN EXCEL

The** Syntax for the function is**

**=DB**(**COST**,** SALVAGE VALUE**,** LIFE **,** PERIOD,MONTH**)

**COST** Initial cost of the asset.

**SALVAGE VALUE** Remaining value of asset at the end of its life.

**LIFE** Useful life of the asset.

**PERIOD** Period for which the depreciation is to be calculated.(e.g. after 2 years or 4 years or so. Unit must be same as life)

**MONTH** Number of the months in the first year.(This is the case when some asset is purchased in the mid of the year.) If not present, 12 is default.

## FORMULA BEHIND THE FUNCTION

The following formula is being used at the back end to calculate the result for you.

**Declining balance method of depreciation** is an accelerated depreciation method in which the depreciation expense declines with age of the fixed asset. This method is especially used to explain the reason that the service provided by the asset degrades with time. It performs well when new and not so well when getting old.

- The fixed-declining balance method computes depreciation at a fixed rate. DB uses the following formulas to calculate depreciation for a period:(cost – total depreciation from prior periods) * ratewhere:rate = 1 – ((salvage / cost) ^ (1 / life)), rounded to three decimal places
- Depreciation for the first and last periods is a special case. For the first period, DB uses this formula:cost * rate * month / 12
- For the last period, DB uses this formula:((cost – total depreciation from prior periods) * rate * (12 – month)) / 12

## EXAMPLE:DB IN EXCEL

### DATA SAMPLE

ASSET COST | 1000 |

SALVAGE VALUE | 100 |

LIFE | 10 |

PERIOD | 1 |

MONTH | 12 |

### STEPS TO USE DB

The data is put in the cells from F6 TO F10. For the result we put the formula in G12 as

=DB(G6,G7,G8,G9,G10)

The result comes out to be $206 which is the depreciated amount for the first year.(ALL 12 MONTHS TAKEN)