Calculate reducing-balance depreciation
Apply a fixed depreciation rate to the carrying amount at the start of each period and compare the pattern with straight line.
Cambridge International AS & A Level Accounting 9706, 2026–2028 syllabus, Version 2. These lessons cover Topic 1.3 only. Practice is self-checked, not an official Cambridge grade; the separately published 2029 syllabus, timed papers and human subject-teacher review remain outstanding.
Before you begin
- Topics 1.1 and 1.2 introduce business resources, equity, double entry and period profit. Use those ideas when recording non-current assets.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
Which amount is multiplied by the reducing-balance rate?
What you will learn
- Calculate reducing-balance depreciation
- Find a later year's charge
- Choose a method using the asset's pattern of use
Apply the rate to the opening carrying amount
Under reducing-balance depreciation, the percentage rate is applied to the asset's carrying amount at the start of the period, rather than repeatedly to original cost. The charge therefore usually decreases each year.
After a charge, closing carrying amount = opening carrying amount − depreciation. Check whether the question specifies a residual value, a full-year charge or a time-apportionment convention.
Method choice should reflect consumption
Straight line gives an even annual charge. Reducing balance gives larger charges earlier and smaller charges later. A method is more appropriate when its pattern better represents how the asset's service potential is used.
Do not select a method just to achieve a preferred profit figure. Consider the asset, expected usage and estimates; disclose and apply the chosen method consistently under the relevant requirements.
Pause and explain
An asset has opening carrying amount $12,000 and a 10% reducing-balance rate. What is the closing amount?
Worked example
An asset costs $20,000 and is depreciated at 25% reducing balance. Find the charges for years one and two and the carrying amount after year two.
Show the worked solution
- Year 1 charge = 20,000 × 25% = $5,000; closing amount = $15,000.
- Year 2 charge = 15,000 × 25% = $3,750.
- Closing carrying amount = 15,000 − 3,750 = $11,250.
Answer Year 1 depreciation is $5,000. Year 2 depreciation is $3,750. Carrying amount after year two is $11,250.
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
An asset with a carrying amount of $18,000 is depreciated at 30% reducing balance. Calculate this year's depreciation and closing amount.
Give me a hint
Use the opening carrying amount, then subtract the charge.
Compare my reasoning
- Charge = 18,000 × 30% = $5,400.
- Closing amount = 18,000 − 5,400.
- Check the amount has fallen by 30% of the opening figure.
Depreciation is $5,400; closing carrying amount is $12,600.
Look for these in your work
- Correct base used
- Charge correct
- Closing amount checked
A machine costs $50,000. It is depreciated at 20% reducing balance. Find the second-year charge and closing amount.
Give me a hint
Find year one's closing amount before calculating year two.
Compare my reasoning
- Year 1 charge = 50,000 × 20% = $10,000; closing amount = $40,000.
- Year 2 charge = 40,000 × 20% = $8,000.
- Closing amount after year two = 40,000 − 8,000 = $32,000.
Year 2 charge is $8,000; closing carrying amount is $32,000.
Look for these in your work
- Year 1 balance correct
- Second-year base correct
- Final balance correct
A delivery vehicle is most productive when new and needs more repairs as it ages. Which depreciation pattern may better match its service pattern, and what evidence should support the choice?
Give me a hint
Compare even allocation with a larger early charge.
Compare my reasoning
- Reducing balance gives larger depreciation charges in earlier periods.
- This may better match an asset whose service potential or economic benefits are greater when new.
- Support the choice with expected usage and benefit pattern rather than a desired profit.
Reducing balance may better reflect greater early service potential, if evidence supports that pattern. The method should be chosen from how the asset is used, not to manage reported profit.
Look for these in your work
- Pattern matched
- Evidence required
- Profit management rejected
Common mistakes
- Applying the reducing-balance rate to original cost every year
- Subtracting accumulated depreciation and then subtracting it again
- Assuming a decreasing charge means that the asset is used less
What can you explain now?
A machine has an opening carrying amount of $8,000 and a reducing-balance rate of 20%. What is this year's charge?
Compare with the explanation
$1,600
Apply 20% to the opening carrying amount of $8,000.
After trying it yourself, choose your next review. This is your self-assessment.
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Make it stick
Why does a reducing-balance charge normally fall from year to year?
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.