Depreciation Calculator
Easily calculate asset depreciation with various methods.
Calculator Inputs
Results
Annual Depreciation (Year 1)
Total Depreciation
Ending Book Value
Depreciation Chart
Depreciation Schedule
| Year | Beginning Book Value | Depreciation Expense | Accumulated Depreciation | Ending Book Value |
|---|
What is Depreciation?
Depreciation is an accounting method of allocating the cost of a tangible or physical asset over its useful life or life expectancy. Depreciation represents how much of an asset's value has been used up. Depreciating assets helps companies earn revenue from an asset while expensing a portion of its cost each year the asset is in use. If not taken into account, it can greatly affect profits.
Keywords: asset depreciation, asset value, accounting method, tangible asset.
Depreciation Methods Explained
There are several methods for calculating depreciation. The choice of method can affect the amount of depreciation expense recorded each period and can have tax implications. This calculator supports the three most common methods.
Straight-Line Method
The straight-line method is the simplest and most commonly used depreciation method. It allocates an equal amount of depreciation expense to each period of the asset's useful life. This method is best for assets that lose value consistently over time.
Formula: (Asset Cost - Salvage Value) / Useful Life
Declining Balance Method
The declining balance method is an accelerated depreciation method. It results in higher depreciation expenses in the earlier years of an asset's life and lower expenses in later years. This is suitable for assets that are more productive when they are new, such as vehicles or machinery. Our declining balance calculator uses a 200% rate (also known as double-declining balance).
Formula: Beginning Book Value * (Depreciation Rate / Periods per Year)
Sum-of-Years-Digits Method
The sum-of-years-digits (SYD) method is another accelerated depreciation technique that also provides for a higher depreciation charge in the early years of an asset's life. The depreciation is based on a fraction derived from the sum of the digits of the asset's useful life.
Formula: (Cost - Salvage Value) * (Remaining Life / Sum of Years' Digits)
Frequently Asked Questions
1. What is depreciation?
Depreciation is an accounting method used to allocate the cost of a tangible asset over its useful life. It represents how much of an asset's value has been used up in a given period.
2. How is straight-line depreciation calculated?
The straight-line method spreads the cost of an asset evenly over its useful life. The formula is: (Asset Cost − Salvage Value) ÷ Useful Life.
3. What is the declining balance method?
The declining balance method is an accelerated depreciation method that records larger depreciation expenses during the earlier years of an asset's life and smaller expenses in later years. It's calculated by applying a constant depreciation rate to the asset's book value at the beginning of each period.
4. How does the sum-of-years-digits method work?
The sum-of-years-digits (SYD) method is another accelerated depreciation technique. It calculates depreciation based on a fraction, where the numerator is the remaining useful life of the asset, and the denominator is the sum of the digits of the asset's useful life.
5. How do I choose the best depreciation method?
The choice depends on the nature of the asset and business goals. Straight-line is simple and suitable for assets that lose value evenly. Accelerated methods like declining balance or SYD are better for assets that are more productive in their early years (e.g., vehicles, tech equipment) as they align expenses with revenue generation and can offer tax advantages.
6. How do I use this calculator effectively?
Enter the asset's initial cost, its estimated salvage value at the end of its life, and its useful life in years. Then, select a depreciation method to see a complete schedule, summary, and chart. Use the optional fields for more detailed calculations, such as multiple periods per year with this comprehensive depreciation calculator.
