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Depreciation: Declining Balance definitions

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  • Double Declining Balance Method
    An accelerated approach allocating more depreciation to early years by applying twice the straight-line rate to the asset's book value.
  • Depreciation Expense
    The annual allocation of an asset's cost, reducing net income and taxable income, especially higher in early years with accelerated methods.
  • Fixed Asset
    A long-term tangible resource acquired for business use, expected to provide benefits over multiple years.
  • Useful Life
    The estimated period an asset is expected to contribute to revenue generation for a company.
  • Residual Value
    The anticipated worth of an asset at the end of its useful life, also known as salvage or scrap value.
  • Depreciation Rate
    A percentage calculated as twice the reciprocal of useful life, used annually to determine depreciation under the double declining balance method.
  • Net Book Value
    The asset's cost minus accumulated depreciation, serving as the base for annual depreciation calculations.
  • Accelerated Depreciation
    A method that allocates higher depreciation expenses in the early years and lower amounts in later years of an asset's life.
  • Depreciable Base
    The total amount of an asset's cost subject to depreciation over its useful life.
  • Plug
    A final adjustment in the last year of depreciation to ensure the asset's book value matches its residual value.
  • Straight-Line Depreciation
    A method allocating equal depreciation expense each year, subtracting residual value at the start.
  • Tax Benefit
    A reduction in taxable income resulting from higher early-year depreciation expenses.
  • Salvage Value
    An alternative term for residual value, representing expected asset worth after use.
  • Scrap Value
    Another synonym for residual value, indicating the estimated end-of-life value of an asset.