According to the diminishing method, most of the fixed asset's value will diminish or be written off in the first year and a lesser amount in the second year and even lesser amounts in the successive years. If compared to the fixed instalment or cost price method, the amount of depreciation will differ from year to year and will decrease from year to year. The book value reduces or diminishes rapidly up to 50% in the first year and a lesser percentage in the second and successive years. This is also why some people refer to it as the accelerated method. The book value is the difference between the cost price and the accumulated depreciation.

There are two basic formulas that may be used to calculate depreciation when the diminishing balance method is used. These methods are: -

1. Fixed percentage on the diminishing or reducing balance method.
   
   
2. The Sum-of-the-digits method.