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In this course, author Curt Frye shows how to perform a wide range of financial calculations quickly and easily using the many financial functions found in Excel 2010. The course details dozens of functions for evaluating cash flows; calculating depreciation; determining rates of return, bond coupon dates, and security durations; and more.
Like the AMORDEGRC function which lets you calculate depreciation using coefficients defined under French accounting rules, the AMORLINC function lets you find the depreciation for a specific accounting period and again this is a function that you will use within the French system. So to calculate depreciation for an accounting period you need the following arguments. The first is the cost. That's simply the amount that you've paid for the asset. The date you purchased it, and then the first period, and that date is the end of the first depreciation period. Then you have the salvage value, which is the amount that you can sell the asset for after it's reached the end of its life.
Then you have the period for which you're calculating depreciation and that refers to a year. So in this case we have here number one. And then the Rate, which we've set to 10% and the Rate for using a depreciation coefficient like this is set under French accounting rules and it's something that you can look up. Then the final argument is the basis and this is how you count the days in a month and in a year. Zero is the American system standard, which is 30-day months times 12 months for a 360 day year, then there's also the European method which the French use and that is option number 4, so that's what I have in cell C9.
So with all that information in place, I can click cell C12 and start creating the formula. So type in an equal sign and then AMORLINC, then a left parentheses, and the first argument is the cost that's in C3, comma, the date purchased is in C4, comma, end of the first period is C5, comma, then the salvage value is in cell C6, comma, the period is C7, comma, the rate, which is again the depreciation coefficient, that's in C8, comma, and then the basis, in other words how we count days in a month and in then a year, and that basis is number four. It's in cell C9. I type a right parentheses to make sure everything is correct. It appears to be and now I press Tab.
And when I do, I see that the depreciation is 37,500 Euros. Now if I would change the period from 1 to 2 in cell C7 and press Enter, you'll see that the depreciation doesn't change. Now if I change the period to 9 you'll see that the depreciation goes down quite a bit. That's because we are approaching the salvage value and the depreciation coefficient operates differently in the calculation. When you calculate depreciation, be sure that you know which set of rules you're using. If you operate under the French system, you'll probably find that the AMORLINC function to be useful.
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