The AMORDEGRC function in Excel is used to calculate the prorated depreciation of an asset for each accounting period, considering a depreciation coefficient based on the life of the assets. This function is particularly useful for financial analysis and asset management tasks. Here’s how to use it:
Syntax
AMORDEGRC(cost, date_purchased, first_period, salvage, period, rate, [basis])
Arguments
- cost: This is the initial cost of the asset.
- date_purchased: The date on which the asset was purchased. This should be entered as a valid Excel date.
- first_period: The end of the first period. This should also be a valid Excel date. Typically, this is the last day of the respective accounting period after the purchase date.
- salvage: The salvage value of the asset at the end of its life. This is the estimated residual value of the asset.
- period: The accounting period for which you want to calculate the depreciation. Periods are typically expressed in numbers (e.g., 1 for the first period, 2 for the second, etc.).
- rate: The rate of depreciation. This needs to be consistent with the period chosen (e.g., annual vs. monthly).
- [basis]: (Optional) The year basis to be used. It determines how many days are in each month and is typically used to accommodate different accounting conventions.
- 0: 360 days (NASD method)
- 1: Actual/actual
- 3: 365 days in year
- 4: 360 days (European method)
Example
Suppose you buy an asset for $10,000 on March 1, 2023, and the first accounting period ends on December 31, 2023. The salvage value is $1,000, the depreciation rate is 20%, and you’re calculating for the first period using the actual/actual basis.
- cost: 10000
- date_purchased: 03/01/2023
- first_period: 12/31/2023
- salvage: 1000
- period: 1
- rate: 0.2
- basis: 1
The formula would be:
=AMORDEGRC(10000, DATE(2023,3,1), DATE(2023,12,31), 1000, 1, 0.2, 1)
Notes
- Ensure dates are entered correctly in Excel, either using the DATE function or by formatted cells.
- This function will round depreciation values based on the NA or European conventions as per the `basis` argument.
- AMORDEGRC is specific and mainly available in the following versions: Excel 2007, Excel 2010, Excel 2013, and later versions.
Using this function correctly aligns your accounting and financial analysis with regional and standard depreciation methods. Always double-check data entries and ensure the adoption of a standardized depreciation rate that’s consistent with the organization’s policies or regional regulations.
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