Depreciation spreads the cost of a long-lived asset across the periods in which the asset is expected to provide value. A depreciation calculator can help estimate periodic expense and remaining book value, but the correct accounting or tax treatment depends on the applicable rules and the asset's circumstances.
Quick Answer
For straight-line depreciation: Annual Depreciation = (Cost β Salvage Value) Γ· Useful Life.
Inputs Explained
Cost is the asset's depreciable starting amount. Salvage value is the estimated value at the end of its useful life. Useful life is the period over which the asset is depreciated. Some methods also require an acquisition date or depreciation rate.
Common Depreciation Methods
Straight-line allocates the depreciable amount evenly. Declining-balance applies a fixed rate to the declining book value, producing larger expense earlier. Sum-of-the-years'-digits is another accelerated method. Tax depreciation may follow statutory schedules rather than book-accounting assumptions.
How to Use the Calculator
- Enter the asset cost.
- Enter salvage value if the selected method uses it.
- Enter useful life or the required depreciation rate.
- Select the appropriate method if the calculator provides options.
- Review annual expense and estimated book value.
Worked Examples
Straight-line example
An asset costs $10,000, has a salvage value of $1,000, and a useful life of 5 years. Annual depreciation = ($10,000 β $1,000) Γ· 5 = $1,800 per year.
Another example
For a $24,000 asset with $4,000 salvage value and an 8-year life, the depreciable base is $20,000 and annual straight-line depreciation is $2,500.
Illustrative Straight-Line Schedule
| Year | Expense | Ending Book Value |
|---|---|---|
| 1 | $1,800 | $8,200 |
| 2 | $1,800 | $6,400 |
| 3 | $1,800 | $4,600 |
| 4 | $1,800 | $2,800 |
| 5 | $1,800 | $1,000 |
Book Value
Under a simple straight-line schedule, book value decreases by the depreciation expense each period until it reaches the estimated salvage value. Actual accounting systems can use conventions for partial years, disposals, improvements, impairment, and other events.
Common Mistakes
- Using a tax depreciation period as if it were automatically the accounting useful life.
- Ignoring salvage value when the chosen method requires it.
- Depreciating an asset below its permitted residual amount.
- Assuming every asset qualifies for the same method.
Important
This calculator is for educational and general informational purposes and is not accounting, tax, or financial advice. Depreciation rules vary by jurisdiction, accounting framework, asset type, and business circumstances. Consult a qualified accountant or tax professional for reporting decisions.