Use Of DB

Use Of DB

			Purchase Price :	£5,000
			Life in Years :	5
			Salvage value :	£200
			Year	Deprecation
			1	£2,375.00	=DB(E3,E5,E4,D8)
			2	£1,246.88	=DB(E3,E5,E4,D9)
			3	£654.61	=DB(E3,E5,E4,D10)
			4	£343.67	=DB(E3,E5,E4,D11)
			5	£180.43	=DB(E3,E5,E4,D12)
			Total Depreciation :	£4,800.58	* See example 4 below.
	What Does It Do ?
	This function calculates deprecation based upon a fixed percentage.
	The first year is depreciated by the fixed percentage.
	The second year uses the same percentage, but uses the original value of the item less
	the first years depreciation.
	Any subsequent years use the same percentage, using the original value of the item less
	the depreciation of the previous years.
	The percentage used in the depreciation is not set by the user, the function calculates
	the necessary percentage, which will be vary based upon the values inputted by the user.
	An additional feature of this function is the ability to take into account when the item was
	originally purchased.
	If the item was purchased part way through the financial year, the first years depreciation
	will be based on the remaining part of the year.
	Syntax
	=DB(PurchasePrice,SalvageValue,Life,PeriodToCalculate,FirstYearMonth)
	The FirstYearMonth is the month in which the item was purchased during the
	first financial year. This is an optional value, if it not used the function will assume 12 as
	the value.
	Formatting
	No special formatting is needed.
	Example 1
	This example shows the percentage used in the depreciation.
	Year 1 depreciation is based upon the original Purchase Price alone.
	Year 2 depreciation is based upon the original Purchase Price minus Year 1 deprecation.
	Year 3 deprecation is based upon original Purchase Price minus Year 1 + Year 2 deprecation.
	The % Deprc has been calculated purely to demonstrate what % is being used.
			Purchase Price :	£5,000
			Salvage value :	£1,000
			Life in Years :	5
			Year	Deprecation		% Deprc
			1	£1,375.00		27.50%
			2	£996.88		27.50%
			3	£722.73		27.50%
			4	£523.98		27.50%
			5	£379.89		27.50%
				=DB(E47,E48,E49,D56)
			Total Depreciation :	£3,998.48
	Example 2
	This example is similar to the previous, with the exception of the deprecation being calculated
	on a monthly basis. This has been done by multiplying the years by 12.
			Purchase Price :	£5,000
			Life in Years :	£5
			Salvage value :	100
			Month	Deprecation
			56	£8.79
			57	£8.24
			58	£7.72
			59	£7.23
			60	£6.78
				=DB(E66,E68,E67*12,D75)
	Example 3
	This example shows how the length of the first years ownership has been taken into account.
			Purchase Price :	£5,000
			Life in Years :	5
			Salvage value :	£1,000
			First Year Ownership In Months :	6
			Year	Deprecation		% Deprc
			1	£687.50		13.75%
			2	£1,185.94		27.50%
			3	£859.80		27.50%
			4	£623.36		27.50%
			5	£451.93		27.50%
				=DB(E74,E76,E75,D84,E77)
			Total Depreciation :	£3,808.54
	Why Is The Answer Wrong ?
	In all of the examples above the total depreceation may not be exactly the expected value.
	This is due to the way in which the percentage value for the depreceation has been calculated
	by the =DB() fumction.
	The percentage rate is calculated by Execl using the formula = 1 - ((salvage / cost) ^ (1 / life)).
	The result of this calculation is then rounded to three decimal places.
	Although this rounding may only make a minor change to the percentage rate, when applied
	to large values, the differnce is compounded resulting in what could be considered as
	approximate values for the the depreceation.
	Example 4
	This example has been created with both the Excel calculated percentage and the 'real'
	percentage calculated manually.
	The Excel Deprecation uses the =DB() function.
	The Real Deprecation uses a manual calculation.
					This is the 'real' deprecation percentage, calculated manually :	27.522034%
						=1-((E117/E116)^(1/E118))
			Purchase Price :	£5,000		= 1 - ((salvage / cost) ^ (1 / life)).
			Salvage value :	£1,000
			Life in Years :	5
			Year	Excel Deprecation	Real Depreciation		Excel % Deprc
			1	£1,375.0000	£1,376.1017		27.500%
			2	£996.8750	£997.3705		27.500%
			3	£722.7344	£722.8739		27.500%
			4	£523.9824	£523.9243		27.500%
			5	£379.8873	£379.7297		27.500%
			Total Depreciation :	£3,998.48	£4,000.00
				Error difference :	£1.52

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