How to Use Microsoft Excel’s Variable Declining Balance Depreciation Function

By Stephen Nelson

The VDB function calculates declining balance depreciation for an asset given the cost, its
salvage value, estimated economic life, the starting accounting period and the ending accounting period for which depreciation is being calculated, the factor at which the balance declines, and, optionally, a switch-to-straight-line switch which is set to either TRUE or FALSE. If you set this switch to TRUE, Excel doesn’t switch to straight-line at the point when straight-line depreciation exceeds declining balance depreciation. If you set this value to FALSE, Excel does switch to straight-line. If you don’t set the optional switch-to-straightline switch to TRUE, Excel sets this value to FALSE.

The VDB function uses the following syntax:

VDB (cost, salvage, life, start period, end period, factor, switch)

Suppose, for example, that you must calculate 150% declining balance depreciation for equipment that costs $50,000, lasts five years, and will have a salvage value of $10,000 at the end of the fifth year. To calculate the depreciation for the first year, you use the following
formula:

=VDB(50000,10000,5,0,1,150%)

The function returns the value 15000.00. Notice that to calculate depreciation for the first
year, you set the start period to 0 and the end period to 1. To calculate the depreciation for the second year, you use the formula

=VDB(50000,10000,5,1,2,150%)

The function returns the value 10500.00. Notice that to calculate the depreciation for the second year, you set the start period to 1 and the end period to 2.

In both of the two preceding examples, Excel will automatically switch to straight-line depreciation at the point when straight-line depreciation for a period exceeds declining balance depreciation. To instruct Excel not to make this switch, you would use the following formula to calculate depreciation for the first year:

=VDB(50000,10000,5,0,1,150%,TRUE)

The word TRUE, which Excel interprets as 1, tells Excel not to switch to straight-line. To instruct Excel not to make this switch in the second year, you would use the following formula to calculate depreciation:

=VDB(50000,10000,5,1,2,150%,TRUE)

Stephen L. Nelson is a Seattle-area CPA and the author of many bestselling books including the MBA’s Guide to Microsoft Excel from which this article is adapted. Nelson also edits the setting up an s corp and the incorporating a small business, the forming an LLC web sites.

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