Sometimes you need to find depreciation for a certain period in the life time of the asset. For instance your life time of the asset is five year but you only want to calculate for the first three years. This is where VDB comes to rescue. Below figure shows the various parameters. You can see the ‘from period’ and the ‘to period’ parameter. Factor is the rate by which the decline happens. If the factor is omitted then it’s taken as 2 which means it’s a double declining balance method. If you do not want double decline then put a rate if decline factor in this parameter. We also have a ‘no_switch’ parameter is ‘FALSE’ then the formula uses straight line depreciation and if it’s ‘TRUE’ then it does not use straight line depreciation.
Figure: - VDB in action
Note :- To understand straight line depreciation refer the previous questions in this chapter.
For instance below is the sample of the VDB formula. The total cost of the asset is 19000, with scrap value of 2000, life time of five years and the depreciation is calculate for the first two periods. By default the ‘no_switch’ is false so its using double declining methodology to calculate depreciation.
Figure: - Sample VDB formula
For instance the below figure shows how we have calculated depreciation for the first two years. In the right hand side we have calculated depreciation for two years using VDB. In the left hand side we have calculated depreciation using double decline for five years. If you add up the first two years depreciation expense it’s the same which we have got from the VDB formula.
