This method is not used very often by businesses. If this
method is used, the total of the number of years of the life span of the fixed
asset is divided by the cost price less the expected trade in or scrap value of
the fixed asset. In the first year, the amount is then multiplied by the highest
number of years (last year) of the life span of the fixed asset. For the second
year, the second last year number of the life span of the asset is used, and so
on. In the last year, the first year's number is used.

The following worksheet is used to calculate the depreciation on a delivery van:

For example our delivery van is R(£) 15 500 less the trade in value of R(£) 500.

R(£) 15 000 + 15 = R(£) 1 000. This is the factor, which we will use through the entire life span of the delivery van.

In year 1 - Use R(£) 1 000 x 5. This is the last year in the delivery van's life span.

In year 2 - Use R(£) 1 000 x 4. This is the second last year in the delivery van's life span.

In year 3 - Use R(£) 1 000 x 3. This is the third year in the delivery van's life span.

In year 4 - Use R(£) 1 000 x 2. This is the second year in the delivery van's life span.

In year 5 - Use R(£) 1 000 x 1. This is the very first year in the delivery van's life span.

If an asset's life span is 3 years, the factor or the sum-of-the-years-digit is 6. It is calculated as follows: 1+2+3 = 6.

The following formula may also be used to find the sum-of-the-years-digit:

Some calculations based on the formulae:

The following worksheet is used to calculate the depreciation on a delivery van:

The sum of the years must be added up. For example if the fixed asset is depreciated over a life span of 5 years, the digits for each of the number of years must be added up. For 5 years we will add up 1+2+3+4+5 = 15. The number 15 are then divided by the cost price of the asset less the trade in or scrap value of the asset.

For example our delivery van is R(£) 15 500 less the trade in value of R(£) 500.

R(£) 15 000 + 15 = R(£) 1 000. This is the factor, which we will use through the entire life span of the delivery van.

In year 1 - Use R(£) 1 000 x 5. This is the last year in the delivery van's life span.

In year 2 - Use R(£) 1 000 x 4. This is the second last year in the delivery van's life span.

In year 3 - Use R(£) 1 000 x 3. This is the third year in the delivery van's life span.

In year 4 - Use R(£) 1 000 x 2. This is the second year in the delivery van's life span.

In year 5 - Use R(£) 1 000 x 1. This is the very first year in the delivery van's life span.

If an asset's life span is 3 years, the factor or the sum-of-the-years-digit is 6. It is calculated as follows: 1+2+3 = 6.

The following formula may also be used to find the sum-of-the-years-digit:

Some calculations based on the formulae: