Depreciation Formula

If you want to invest into real estate, then you must be aware of the fact that depreciation on your tax returns helps you save more. The calculations involved here are a bit tedious so there is a depreciation formula to calculate the depreciation of your investments.

Using Microsoft Excel’s VDB function, you can calculate the depreciation value for your assets if you provide its cost, the estimated time duration of the proper functionality of the asset, the starting and the ending period and the declining factor of the balance. There is a switch to straight line switch, which can be set to either TRUE or FALSE. The default value that Excel chooses is FALSE if you do not set that to true. Following is the syntax used by the VDB function:

VBD (cost, salvage, life, start-period, end-period, factor, switch)

For example, if you want to calculate the 120% depreciation value for the first year which is $1, 00,000 with the salvage value of $20,000 and is estimated to last for five years, the following depreciation formula should be used to calculate the depreciation value for the first year:

=VBD (100000, 20000, 5, 0, 1,120)

The start and the end period should be carefully mentioned in the depreciation formula depending upon the particular year in which the depreciating value is to be calculated.