Microsoft Office Tutorials and References
In Depth Information
Examples of Depreciation Functions
The nperyargument is truncated to an integer. If either argument is nonnumeric,
NOMINAL returns a #VALUE! error. If effect_rateis less than or equal to 0
or if nperyis less than 1, NOMINAL returns a #NUM! error.
Examples of Depreciation Functions
When a company buys a large asset such as a piece of machinery, accounting
rules specify how the asset should be expensed each year. This is called de-
preciation. Excel offers four common methods for calculating depreciation:
straight-line, declining-balance, double-declining-balance, and sum-of-
years -digits methods.
The following terms are common to all the depreciation methods:
Cost This is the initial cost of the asset. For example, the ma-
chinery might cost $120,000.
Useful life
Useful life This is how long you expect to use the asset. If you
think you will use the machinery for 10 years before replacing it, the
life is 10 years.
Salvage value
Salvage value This is the value of the asset at the end of the use-
ful life. Perhaps after 10 years, you can sell the machine to a scrap
dealer for $1,000 or to a trade school for $5,000. This is the salvage
Figure 13.10 compares the four depreciation methods.
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