SYD
years digits.
The depreciation is greatest in the earlier part of the items life.
What is the Sum Of The Years Digits ?
A life of 3 years has a sum of 1+2+3 equalling 6.
Each of the years is then calculated as a percentage of the sum of the years.
Year 3 is 50% of 6, year 2 is 33% of 6, year 1 is 17% 6.
The total depreciation of the item is then allocated on the basis of these percentages.
A depreciation of £9000 is allocated as 50% being £4500, 33% being £3000, 17% being £1500.
As the greater part of the depreciation is allocated to the earliest years the values are
inverted, year 1 is $4500, year 2 is £3000 and year 1 is £1500.
Example 1
1. Add together the digits of the Life to get the Sum Of The Years Digits, 1+2+3=6.
2. Subtract the Salvage from the Purchase Price to get Total Deprectation, £10000-£1000=£9000.
3. Divide the Total Deprectation by the SumOfTheYearsDigits, £9000/6=£1500.
4. Invert the year digits, 1,2,3 becomes 3,2,1.
5. Multiply 3,2,1 by £1500 to get £4500, £3000, £1500, these values are the depreciation
values for each of the three years in the life of the item.
Example 2
Formatting