Microsoft Office Tutorials and References
In Depth Information
Chapter 33: Accounting Depreciation Functions
Accounting Depreciation Functions
Wikipedia defines depreciation as “ a term used in accounting, economics, and
finance to spread the cost of an asset over the span of
Excel has a number of these functions as part of its financial func-
tions. All these function have similar features: initial cost, salvage value, and the
numbers of years. This chapter will cover only two functions: the Straight Line
Depreciation, SLD, and the Sum of the Years Digits, SYD. The first function is a
simple depreciation method and the second one is an accelerated one.
SLD STRAIGHT LINE DEPRECIATION
This function assumes the same, or a uniform, depreciation rate for all of the years of
the economic life of the asset. For example if the initial value of the asset is $60,000
and the salvage value five years later is $10,000, then the annual depreciation would
be $10,000 [(60,000
10,000)/5]. The following is the syntax of the Straight Line
cost , salvage, life
Cost is the initial cost of the asset.
Salvage is the value at the end of the depreciation period or the economic life of
Life is the number of periods over which the asset is depreciated.
The function is shown in Figure 33.1. The depreciation is $10,000 per year for
the lifetime of the asset.
SYD SUM OF THE YEARS DIGITS
Sum of the Years Digits is different. This is an accelerated depreciation function. The
depreciation rate is different from year to year. The syntax of this function is:
cost , salvage, life, per