Depreciation Calculator

Few assets hold their value. A delivery van, a lathe, a laptop fleet — each gives up a slice of its worth every year it serves, and accounting insists that cost be recognised gradually rather than in one painful lump at replacement time. The Depreciation Calculator works out that yearly wearing-away: how much value an asset loses per period, and what its book value stands at on any future date. It is for small-business owners preparing accounts, freelancers claiming equipment costs, and students meeting the standard depreciation methods for the first time.

Quick Answer

Straight-line depreciation per year = (Cost − Salvage Value) ÷ Useful Life. A $50,000 machine expected to be worth $5,000 after 9 years depreciates by (50,000 − 5,000) ÷ 9 = $5,000 every year.

The Main Methods, and Why They Differ

Straight-line is the default because most assets in an office wear out at a fairly even pace: the same expense lands in every year, and the book value walks down a staircase of equal steps to the salvage value — the amount you expect to recover by selling or scrapping the asset at the end. The total written off across the asset's life is always cost minus salvage; only the timing changes between methods.

Declining-balance methods front-load the expense to match assets that lose value fastest when new, vehicles being the textbook case. Double-declining balance applies twice the straight-line rate to the current book value each year, ignoring salvage in the annual calculation (though book value is never written below salvage). Units-of-production takes a different road entirely, tying depreciation to output — kilometres driven, hours run, units made — which suits machinery whose wear is driven by use rather than time. Accountants choose among these based on how the asset actually loses value and what the applicable accounting standards and tax rules permit; the calculator lets you compare the schedules rather than guess which pattern a given asset follows.

How to Use the Depreciation Calculator

1. Enter the asset's full acquisition cost, including delivery and installation if your accounting policy capitalises them.
2. Enter the estimated salvage (residual) value at the end of its useful life.
3. Enter the useful life in years.
4. Select the depreciation method you want to model.
5. Read the depreciation expense per year and, where shown, the year-by-year book value.
6. Note the final year's book value — it should end at, or just above, the salvage value.

Worked Example: A Machine over Nine Years

A workshop buys a machine for $50,000, expects to sell it for $5,000 after 9 years, and depreciates it straight-line. The depreciable amount is 50,000 − 5,000 = $45,000, spread evenly: 45,000 ÷ 9 = $5,000 per year. The book value falls by that amount annually — $45,000 after year 1, $40,000 after year 2, and by the end of year 4 it stands at 50,000 − (4 × 5,000) = $30,000, arriving at exactly $5,000 in year 9. Contrast the double-declining schedule for the same machine: the rate is 2 ÷ 9 = 22.22 percent of book value, so year 1 takes 50,000 × 0.2222 = $11,111 of expense — more than double the straight-line charge — while the later years taper off. Same asset, same total over its life apart from timing conventions; very different yearly profit figures.

Assumptions That Move the Answer

Everything hinges on two estimates you supply. Salvage value is a judgement about a future sale years away — set it carelessly high and the annual charge shrinks, overstating profit now and storing up a loss on disposal. Useful life is likewise an estimate, and stretching it flatters early-year profits. A second trap is confusing book depreciation with tax depreciation: tax codes in many countries prescribe their own rates and systems (such as MACRS in the United States), which frequently differ from the figures used in financial statements, and the two schedules must be tracked separately. Third, land is not depreciated, and buildings usually sit on much longer lives than the equipment inside them, so a property purchase should be split into components. Finally, repairs do not reverse depreciation — maintenance keeps an asset working but is expensed as incurred unless it genuinely extends the asset's life or capacity.

Reading a Straight-Line Schedule Year by Year

A compact example shows how the schedule, the expense and the book value interlock. Take equipment costing $12,000 with a $2,000 salvage value and a 5-year life. The depreciable amount is $10,000, so the straight-line charge is 10,000 ÷ 5 = $2,000 per year, and accumulated depreciation — the running total of all charges to date — grows by that step annually:

• End of year 1: accumulated $2,000, book value $10,000
• End of year 2: accumulated $4,000, book value $8,000
• End of year 3: accumulated $6,000, book value $6,000
• End of year 4: accumulated $8,000, book value $4,000
• End of year 5: accumulated $10,000, book value $2,000 (the salvage value)

Book value is simply cost minus accumulated depreciation, and the schedule's discipline is that it lands exactly on salvage — never below — at the end of the planned life. If the asset is sold earlier for more or less than its book value at that date, the difference becomes a gain or loss on disposal in that year's accounts, which is the mechanism that eventually corrects all the estimates built into the schedule.

Depreciation schedules here are general information and estimates for planning only, not financial or tax advice. Depreciation and capital-allowance rules vary by country and change over time — confirm the treatment with a qualified accountant.

Prorating deserves one extra word, because assets rarely arrive on the first day of the financial year. If a machine with a ten-year life and a $4,000 annual charge is bought four months into the year, most businesses book only the four months of use in year one — roughly $1,333 — and let the remaining fraction spill into an eleventh partial year at the end. The total depreciation over the asset’s life is unchanged; only its timing shifts. Whichever convention a business adopts, consistency matters more than the choice itself, since auditors and tax authorities both expect the same method, applied the same way, year after year.

Related Tools for Asset and Business Figures

If you already know you want the even-charge method in isolation, the dedicated Straight Line Depreciation Calculator focuses on exactly that schedule. Depreciation also flows into profitability measures: it is one of the items added back in the EBITDA Calculator, and both tools belong to the broader financial calculators collection.