## Sum Of The Years Digits Method

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# Sum-Of-The-Years-Digits Method

A similar method than written down value is the “Sum-of-the-years” digit (SYD) method. This is an accelerated method of depreciation which is also based on the assumption that the loss of economic usefulness of an asset is the greatest during the earlier year. Other reasons are that an asset is more productive due to fewer breakdowns and lower repairs and maintenance during the earlier years. Other reasons are that an asset is more productive due to fewer breakdowns and lower repairs and maintenance during the earlier years. These factors therefore provide the basis of higher depreciation charges when the asset is new and lower charges in the later years. Consequently it would enable proper matching or costs and revenues. The depreciation expense under this method is computed by multiplying the depreciable cost of the by a fractions based upon the years digits. The ‘sum-of-years’ digits (SYD) is found by estimating asset’s useful life in years, then assigning a number starting with one and increasing by one each year, and totaling these numbers. For example, if the useful life of the asset is 5 years, the S.Y.D. would be:

SYD = 1+2+3+4+5 = 15

The SYD is used as a denominator for the allocation of cost. The numerators are the years in reverse order as shown below:

Suppose the useful life of an asst is 5 years, the calculation would be:

Sum of years ‘digit’ is: = 1+2+3+4+5 = 15

1 year’s depreciation would be.. = 5/15 x depreciable cost.

2 year’s depreciation would be .. = 4/15 x depreciable cost.

3 year’s depreciation would be .. = 3/15 x depreciable cost.

4 year’s depreciation would be .. = 2/15 x depreciable cost.

5 year’s depreciation would be .. = 1/15 x depreciable cost.

The formula for this method is:

D = N (C-S)/SYD

Where D = the annual depreciation expense

C = cost of the asset

S = the salvage value

SYD = the sum of the year’s digit

N = the nth years is in inverse order, that is, 5th the first year, 4th the second year, 3rd the third year ad so on.

The formula for determining sum of the years’ digits is:

SYD = N (N+1)/2

Where N = number of years.

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SYD = 1+2+3+4+5 = 15

**(The SYD refers to the summation of the years’ digit).**The SYD is used as a denominator for the allocation of cost. The numerators are the years in reverse order as shown below:

Suppose the useful life of an asst is 5 years, the calculation would be:

Sum of years ‘digit’ is: = 1+2+3+4+5 = 15

1 year’s depreciation would be.. = 5/15 x depreciable cost.

2 year’s depreciation would be .. = 4/15 x depreciable cost.

3 year’s depreciation would be .. = 3/15 x depreciable cost.

4 year’s depreciation would be .. = 2/15 x depreciable cost.

5 year’s depreciation would be .. = 1/15 x depreciable cost.

The formula for this method is:

D = N (C-S)/SYD

Where D = the annual depreciation expense

C = cost of the asset

S = the salvage value

SYD = the sum of the year’s digit

N = the nth years is in inverse order, that is, 5th the first year, 4th the second year, 3rd the third year ad so on.

The formula for determining sum of the years’ digits is:

SYD = N (N+1)/2

Where N = number of years.

For more help in

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