Reflect on confidence, connect to business problem, preview Excel build lesson
What You Now Know About DDB and Method Choice
Sarah now has two powerful tools in her depreciation toolkit. She can calculate straight-line for simplicity and DDB for tax advantage. More importantly, she understands why the choice matters.
The DDB Formula
DDB Rate = 2 × (1 ÷ Useful Life)
Expense = Beginning Book Value × DDB Rate
The Salvage Floor
Book value can never fall below salvage value. If the calculated expense would violate this rule, reduce the expense to the floor amount.
Method Comparison
DDB records higher expense in early years and lower expense in later years compared to straight-line. Total depreciation over the asset's life is the same under both methods.
The Business Choice
Choose DDB for tax advantage and realistic matching on fast-depreciating assets. Choose straight-line for simplicity and steady profit reporting.
What Comes Next
Now that you understand both depreciation methods by hand, it is time to build them into Excel. In Lesson 05, you will create a professional asset register and depreciation schedule workbook that can handle multiple assets, multiple methods, and automatic calculations.
In the next lesson, you will build an Excel workbook that includes:
An asset register listing all fixed assets with cost, life, and salvage value
A depreciation schedule that calculates expense, accumulated depreciation, and book value
Formula-driven calculations that update automatically when you change assumptions
A method comparison section that shows SL vs DDB side by side
Why this matters: The manual calculations you mastered in Lessons 03 and 04 are the foundation. Excel will do the arithmetic, but you need to understand the logic to build correct formulas and catch errors.