Double declining depreciation, the double-declining-balance method, charges depreciation at twice the straight-line rate applied to the asset's opening book value each year, so the charge is largest in the first year and falls every year after. It suits assets that lose most of their value early, computers and vehicles above all, and it is the second method the free fixed asset register worksheet on this site works on every line. This page sets out how the rate is found, works the same asset through five years, explains why the salvage value acts as a floor rather than a deduction, and says when a small organisation would choose the method for its books. The method a tax return may use is a different question, for your preparer.
The rate: twice the straight-line rate
Straight-line spreads the cost over the life, so its rate is one over the life: a fifth a year for five years. Double declining balance doubles it: two fifths a year for a five-year life, a half for four years, two thirds for three. The rate is applied to the opening book value of each year, not to the cost less salvage, which is the difference that makes the charge fall every year and the reason the salvage value is handled as a floor rather than deducted first.
Five worked years on a $18,500 asset with $1,500 salvage
Year one: two fifths of $18,500 is $7,400, closing at $11,100. Year two: two fifths of $11,100 is $4,440, closing at $6,660. Year three: $2,664, closing at $3,996. Year four: $1,598, closing at $2,398. Year five would charge $959 and close at $1,439, below the $1,500 salvage value, so the charge is limited to $898 and the schedule closes at $1,500. Over the five years the total charged is $17,000, the same as straight-line; the method changes when it is charged, not how much.
The salvage value as a floor, and the switch to straight-line
Because the rate is applied to a falling balance, the book value approaches but never reaches zero on its own. The salvage value is the floor: the book value may not fall below it, and the final charge is cut to land exactly on it. Some organisations also switch to straight-line for the remaining book value when that gives a larger charge, usually in the later years; the register records the switch as a dated method change on the line so the schedule from that date is recomputed and the history is not rewritten.
When a small organisation chooses double declining balance
When the class of asset genuinely loses most of its value early and the books should show that: computers, phones, vehicles, some machinery. The choice is a policy by class, made with the accountant and applied consistently; a register that lets each line pick its own method produces a schedule nobody can explain. The worksheet on this site shows straight-line and double-declining on the same inputs so the difference for one asset is visible before the policy is set.
Questions people ask about double declining depreciation
What is double declining depreciation in one sentence?
A method that charges twice the straight-line rate on each year's opening book value, so the charge is largest in year one and falls every year, with the salvage value as a floor.
Why is the total depreciation the same as straight-line?
Because both methods depreciate the cost down to the salvage value over the life; double declining balance moves more of that total into the early years, it does not change the total.
Is double declining balance allowed for the books of a small business?
It is an accepted bookkeeping method when applied consistently by class and disclosed. Whether it is the right choice for your books is your accountant's call; whether a tax return may use it is your preparer's.
What is the rate for a three-year life?
Twice one third, so two thirds of the opening book value a year, which is why three-year computer equipment loses two thirds of its book value in the first year under this method.