The sum-of-the-years-digits method is an another form of accelerated depreciation. The annual depreciation is calculated by subtracting salvage value from original cost, and multiplying this figure by a fractional rate of depreciation. The denominator of the fraction is the sum of the years of useful life; for a life of 5 years, the denominator is = 1 + 2 + 3 + 4 + 5 = 15. The numerator is the year in reverse order. For the first year, the numerator is 5 and the fraction is 5/15.
Example:
Bought equipment worth $ 12,000 with a residual value of $2,000. Its life is estimated at five years.
The denominator is determined as follows:
Yr. 1 + Yr. 2 = 3 + Yr. 3 = 6 + Yr. 4 = 10 + Yr. 5 = 15
The formula to solve the SYD depreciation is
SYD fraction x Cost – Residual = Depreciation expense
| Year | SYD Fraction | X | Cost – Residual | X | Depreciation |
| 1 | 5/15 | X | $ 10,000 | X | $ 3,333 |
| 2 | 4/15 | X | $ 10,000 | X | $ 2,667 |
| 3 | 3/15 | X | $ 10,000 | X | $ 2,000 |
| 4 | 2/15 | X | $ 10,000 | X | $ 1,333 |
| 5 | 4/15 | X | $ 10,000 | X | $ 667 |
| 15/15 | Total depreciation | $10,000 |
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