# Difference between double declining balance and reducing balance

As I understand it if we have a double declining balance asset worth £10,000, declining over 10 years, we will depreciate by an annual rate of 20%.

But I have also been told that double declining is not identical to reducing balance.

So, I ask, what is the difference?

Thanks

Reducing balance is otherwise known as declining balance. Double declining is what it sounds: Doubling the rate of the declining balance of the asset.

To calculate depreciation under the double declining method, multiply the book value at the beginning of the fiscal year by a multiple of the straight-line rate of depreciation. The double declining balance formula is:

Double-declining balance (ceases when the book value = the estimated salvage value)

2 × Straight-line depreciation rate × Book value at the beginning of the year

http://www.accountingtools.com/double-declining-balance-depre

Reducing balance on the other hand:

Definition: Reducing Balance Depreciation is calculated by charging a higher rate in the early part of the assets life. This method is considered for any asset that has a high usage in the early part of their life. An example of how this is calculated is show below. The amount of depreciation reduces as the life of the asset progresses.

Example An asset has a useful life of 3 years Cost of the asset was £4,000 Residual or Scrap Value is £300 Rate of depreciation is 50% Depreciation to be expensed for the three years will be: NBV R.V Rate Depreciation Accumalated Depreciation

Year1: (4,000 - 300) x 50% = 1,850 1,850

Year2: (2,150 - 300) x 50% = 925 2,775

Year3: (1,225 - 300) x 50% = 925* 3,700