What is the formula for the diminishing balance basis method of depreciation?

The formula for the diminishing balance basis method of depreciation reflects how an asset’s value decreases over time, applying a fixed percentage of depreciation to the carrying amount, rather than the original cost. This method assumes that the asset will lose more value in the earlier years of its life.

The correct approach involves multiplying the carrying value of the asset by the depreciation rate, which effectively calculates the expense for that period based on the asset’s book value rather than its original cost. This creates a situation where the depreciation expense is high in the initial years and decreases over time, aligning with the asset's consumption.

Your answer identifies a formula that does not accurately perform this function. To clarify, under the diminishing balance method, the depreciation in any given year is determined by taking the carrying amount of the asset at the start of the year (cost less accumulated depreciation) and multiplying it by the chosen rate, which aligns with the correct understanding of asset depreciation.

The other options also present formulas but do not correctly represent the diminishing balance depreciation method. For example, calculating based on the asset's cost or considering the residual value together with the cost does not align with the principles of diminishing balance depreciation.