Sum of Years' Digits Depreciation Method

Sum-of-Years' Digits is a depreciation method that results in a more accelerated write-off than straight line, but less than declining-balance method. With this method, annual depreciation is determined by multiplying the depreciable cost by a set of fractions.

Depreciable Cost = Original Cost - Salvage Value
Book Value = Original Cost - Accumulated Depreciation

Example: If an asset has original cost $1,000, a useful life of five years and a salvage value of $100, to calculate its depreciation schedule:

Determine Years' digits. Because the asset has a useful life of five years, the Years' digits are: 5, 4, 3, 2, and 1.
Calculate the sum of the digits. 5+4+3+2+1=15

Depreciation rates are as follows:
- 5/15 for the 1st year
- 4/15 for the 2nd year
- 3/15 for the 3rd year
- 2/15 for the 4th year
- 1/15 for the 5th year

Book Value - Beg. of Year	Total Depreciable Cost	Depreciation Rate	Depreciation Expense	Accumulated Depreciation	Book Value - End of Year
$1,000 (Original Cost)	$900	5/15	$300 ($900 * 5/15)	$300	$700
$700	$900	4/15	$240 ($900 * 4/15)	$540	$460
$460	$900	3/15	$180 ($900 * 3/15)	$720	$280
$280	$900	2/15	$120 ($900 * 2/15)	$840	$160
$160	$900	1/15	$60 ($900 * 1/15)	$900	$100 (Scrap Value)

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