Years’ Digits Method of Calculating Depreciation

This method, like diminishing balance, is based on the assumption that the reduction in the value of the fixed asset will be greater initially and will go on decreasing gradually with the decrease in the life of such asset.

The amount of depreciation is calculated by using the following formula:

Depreciation formula


An asset has been purchased for Rs 50,000, its effective life being 5 years.


The scrap value is estimated at Rs 5,000. Depreciation for the years is calculated as follows:


Amount to be written off = Rs 50,000 – 5,000 = 45,000


The sum of all digits is 15 i.e. 1+2 + 3 + 4 + 5=15

Depreciation Calculation

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