How to Use DB Function in Excel (Calculate Depreciation)

Hello friends! Today I show you DB() function in Excel. It is very good for business and accounting!

What is DB? It stand for "Declining Balance". When you buy a new computer or machine for business, it become old and lose value every year. This is called Depreciation. The DB function help you see exactly how much money value it lose in a specific year!

🛠️ How to write DB Function

To use DB, you need 4 things: how much it cost today, how much you can sell it for when it is old, how many years you use it, and WHICH year you want to check.

Formula Syntax:

=DB(cost, salvage, life, period, [month])

• cost: The price you pay to buy it today.
• salvage: How much money you get if you sell it when it is old (at end of life).
• life: How many years you will use it before it is old.
• period: WHICH year you want to check? (Example: 1 for Year 1, 2 for Year 2).
• [month]: (Optional) Number of months you use it in the first year. If you ignore this, Excel will think 12 months.

📊 Short & Clear Example

Imagine your company buy a big printer for $5,000 (This is Cost). You will use it for 5 years (This is Life). After 5 years, it is old, so you can only sell it for $500 (This is Salvage).

You want to know: How much value does the printer lose in Year 1?

Formula to find Value Lost in Year 1:

=DB(B1, B2, B3, B4)

• Result: $1,845.00
• What it means? It means in Year 1, your shiny new printer lose $1,845.00 in value! It get old very fast!
• What about Year 2? If you change B4 to 2, the result is $1,164.21. The value lost is smaller because the printer is already old!

💡 Easy Pro Tips

1. Value goes down fast, then slow: With the DB function, you lose the most money in Year 1! In Year 5, you lose very little money. This is how "Declining Balance" works!
2. Buying in the middle of the year: If you buy the printer in July (only use it for 6 months in Year 1), you can add the month! =DB(B1, B2, B3, B4, 6).
3. Brother of SLN: Excel also has the SLN function. SLN loses the exact same money every year. DB loses a lot of money early, and a little money later.

📚 Useful Resources

• How to Use NPV Function in Excel (Net Present Value Easy Guide)
• How to Use PMT Function in Excel (Calculate Loan Easy)
• How to Use PV Function in Excel (Find Present Value)