vfp reducing balance depreciation method

[WIREMESH]

Does anyone have a vfp reducing balance depreciation method sub routine? Not straight line depreciation

 

[gomaram]

Dear Remesh

Reducing balance can be specified by having figures into database, you can run a process on a monthly basis and have amount -

Cost of Purchase
Period to be depreciated
Period already depreciated
Amount depreciated
balance amount

Next month, you can calculate depreciation on balance amount for remaining period

Kind Regards

 

[Olaf Doschke]

How about specifying what you want and not what you don't want?

There are other ways to calculate depreciation, eg Double Declining Balance Depreciation Method. But it's simplistic math in that case, it's just multiplying the straight line rate with 2.

Whatever you take as the rate for a certain year, you calculate book value x rate for that years depreciation, and subtract that from the book value for next years book value. Or you subtract the sum of all depreciations from the initial cost = initial book value.

Bye, Olaf.

 

[Mike Lewis]

You should be able to do this with a simple loop. Something like this perhaps:

lnBook = 1000  && book value
lnRate = 40    && percentage rate
lnYears = 5

FOR lnI = 1 TO lnYears
  lnBook = lnBook - (lnBook * lnRate / 100.0)
ENDFOR

Each time round the loop, lnBook will contain the current book value. At the end of the loop, it will contain the final depreciated value.

Does that help at all?

Mike



__________________________________
Mike Lewis (Edinburgh, Scotland)

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[JRB-Bldr]

reducing balance depreciation method sub routine? Not straight line depreciation

OK, you have told us what it is NOT, but what IS IT?
Remember that we are not all Accountants and/or Inventory Control Specialists with that info right at hand.

Maybe you need to do a Google Search for: reducing balance depreciation

Once you know HOW to calculate it and can share that with us, then we can help you with code to make that happen.

Good Luck,
JRB-Bldr

 

[Mike Lewis]

Wiremesh,

I was wondering if the code I posted above was what you were looking for. I'd appreciate your feedback.

If I misunderstood your requirement, let me know and I will have another think.

Mike


__________________________________
Mike Lewis (Edinburgh, Scotland)

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[WIREMESH]

Thanks for all the posts. I am trying to calculate depreciation for automobiles in 1 context, and general equipment (i.e boilers, chillers, ac units) for the remaining.

My application tracks assets and allows the user to select the depreciation for the type of equipment. Currently, all equipment is depreciated using straighline method.

I read online where for vehicles, which depreciate at a higher rate int he early years, the reducing balance method should be used.

 

[WIREMESH]

Definition:
The reducing balance method of depreciation provides a high annual depreciation charge in the early years of an asset's life but the annual depreciation charge reduces progressively as the asset ages.

To achieve this pattern of depreciation, a fixed annual depreciation percentage is applied to the written-down value of the asset. Thus, depreciation is calculated as a percentage of the reducing balance.

For certain fixed assets, the benefits derived may be high in the early years, but may decline as the asset ages. For such assets, the reducing-balance method of depreciation would be appropriate insofar as it matches the depreciation expense with the pattern of benefits.

 

[mm0000]

It would helpful if you gave us the file structure of your Asset Master table / related tables required for computing depreciation. The key fields required would include Original Cost, Depreciation Rate, Accumulated Depreciation, Residual Value, Depreciation Last Computed Period.

 

[Mike Lewis]

Wiremesh,

As far as I can see, the code I gave you will meet your definition. Can I ask you again if you have looked at it, and if you think it will work?

The only reason I am asking is so that I can help you find the best solution.

Mike

__________________________________
Mike Lewis (Edinburgh, Scotland)

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[WIREMESH]

Thanks for all the posts. Mike, your algorithm looks like it will work. The question I have with it is looking at a definition I found online
"The reducing balance method of depreciation provides a high annual depreciation charge in the early years of an asset's life but the annual depreciation charge reduces progressively as the asset ages."

Does (and should) you algorithm meet this criteria?

 

[WIREMESH]

Mike,

After further research, your algorithm works perfectly! Thanks.
I checked with this link

http://www.tutor2u.net/business/accounts/assets_fixedassets_depreciation_rbexample.asp

 

[Mike Lewis]

Glad that it worked, Wiremesh. There's nothing mysterious about the reducing-balance method. As you've found, it simply means that you apply the depreciation to the new balance each period, rather than to the initial value. It's a bit like the difference between compound interest and simple interest.

Mike

__________________________________
Mike Lewis (Edinburgh, Scotland)

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[Olaf Doschke]

Hi WIREMESH,

The reducing balance method of depreciation provides a high annual depreciation charge in the early years of an asset's life but the annual depreciation charge reduces progressively as the asset ages

This is not specifically describing any concrete formula, but just describes a computation, where depreciation is not constant over the years. That's already the case, if you apply Mikes code, as it computes a percentage of the book value and since that lowers the next depreciation rates also are lower and lower.

You could also have a varying percentage with a higher percentage in the first years, this would even account for a higher loss of value in the first years.

So if you could point to the source of that description there surely would be more about a concrete formula. If Mikes code gives you the expected numbers, fine. If you are just satisfied, because the depreciation starts hihger and gets lower every year, then this is not at all a proof you, your company or your customer wants that calculation.

I think it would be most easy if a user could sinmply specify the rates for each year in a small table and so you can calculate very individually.

Bye, Olaf.