Quick Answer: Calculate asset depreciation using straight-line, declining balance, double-declining balance, or sum-of-years-digits methods with a year-by-year book value schedule.
How This Calculator Works
Depreciation allocates the cost of a long-lived asset across its useful life. This calculator estimates annual depreciation expense, accumulated depreciation, and ending book value under common accounting methods.
Worked Scenario: Scenario: Depreciating Business Equipment
A business buys equipment for 11,000, expects a 1,000 salvage value, and plans to use it for 5 years.
Scenario Inputs
- Asset cost: $11,000
- Salvage value: $1,000
- Useful life: 5 years
Outcome: Straight-line depreciation spreads the 10,000 depreciable base evenly across 5 years, producing 2,000 of depreciation per year.
Formula and Methodology
Depreciable base = Asset cost - Salvage value
Straight-line depreciation = Depreciable base / Useful life
Declining balance depreciation = Beginning book value * Depreciation rate
Double-declining rate = 2 / Useful life
SYD depreciation = Depreciable base * Remaining life / Sum of years digits
Variables
- Asset cost: Purchase price or capitalized basis of the asset
- Salvage value: Estimated value remaining at the end of useful life
- Useful life: Number of years over which the asset is depreciated
Assumptions
- Depreciation is capped so book value does not fall below salvage value.
- Schedules are annual and use the selected method consistently across the useful life.
- Partial-year mode applies the selected percentage to first-year depreciation and shifts the remainder into the next year where possible.
Limitations
- This calculator is for educational estimates and does not determine tax depreciation eligibility.
- It does not model MACRS conventions, bonus depreciation, Section 179, local tax rules, or asset-specific accounting policies.
- Actual accounting treatment should follow the applicable financial reporting or tax rules.
Practical FAQs
What is salvage value?
Salvage value is the estimated value of the asset at the end of its useful life. Depreciation normally stops once book value reaches salvage value.
What is double-declining balance?
Double-declining balance is an accelerated method that applies twice the straight-line rate to the asset's beginning book value each year.
Which depreciation method should I use?
Straight-line is simple and even. Declining balance and sum-of-years-digits accelerate depreciation into earlier years. The correct method depends on accounting policy and tax rules.