Reconnect to Lesson 03's straight-line method and surface the friction point that makes DDB necessary
The Straight-Line Problem
Sarah's accountant points out something important: straight-line depreciation is simple, but it does not always match how assets actually lose value.
In Lesson 03, you learned that straight-line depreciation records the same expense every year. For TechStart's $30,000 van, that was $5,000 per year for 5 years. But think about it: does a van really lose the same amount of value in Year 5 as it does in Year 1?
A brand-new van driven off the lot loses thousands of dollars in value immediately. By Year 5, most of the value is already gone. Straight-line ignores this pattern. For tax purposes and for matching real economic loss, many businesses prefer an accelerated depreciation method.
Two Methods, Two Pictures
$5,000 expense every year. Simple and predictable. But does not match how the van actually loses value.
Equal each yearHigher expense in early years, lower in later years. Matches the real pattern of asset value loss more closely.
AcceleratedIn this lesson, you will learn how double-declining balance (DDB) works, why businesses choose it over straight-line, and how the same asset produces very different financial pictures under each method.
Key formula: DDB Rate = 2 × (1 ÷ Useful Life). Then apply that rate to the beginning book value each year — not the depreciable base.