Depreciation Calculator
Spreading an Asset's Cost Over Its Useful Life
A delivery van doesn't get expensed the day it's purchased — its cost is spread across the years it actually helps generate revenue. That's depreciation: an accounting mechanism, not a cash transaction, that matches an asset's cost to the periods it benefits. This calculator handles the two most common methods, since the right one depends on whether an asset loses value evenly over time or more heavily in its early years.
The Formulas
Straight-Line Method:
Annual Depreciation = (Cost − Salvage Value) / Useful Life
Declining-Balance Method:
Depreciation Expense = Book Value × Rate
New Book Value = Book Value − Depreciation Expense
Annual Depreciation = (Cost − Salvage Value) / Useful Life
Declining-Balance Method:
Depreciation Expense = Book Value × Rate
New Book Value = Book Value − Depreciation Expense
Worked Examples
| Method | Inputs | Result |
|---|---|---|
| Straight-Line | Cost $45,000, Salvage $5,000, Life 8 years | $5,000.00 / year |
| Declining-Balance | Book Value $45,000, Rate 20% | $9,000.00 expense, new book value $36,000.00 |
Where Each Method Applies
- Straight-line for predictable, even wear — office furniture, buildings, and other assets that lose value at a roughly constant rate each year are typically depreciated this way for simplicity and consistency in financial statements.
- Declining-balance for front-loaded value loss — vehicles, computers, and other equipment that lose the most value in their first few years of use are often depreciated with an accelerated method instead, since it more closely mirrors actual resale value decline.
- Tax planning — accelerated depreciation methods produce larger deductions in early years, which can matter for cash flow planning even when a business uses straight-line for its own internal books.
- Asset replacement budgeting — tracking book value over time under either method helps forecast when an asset's carrying value will approach its expected trade-in or disposal value.
Note: Declining-balance depreciation, run year over year, never mathematically reaches zero — most businesses switch to straight-line or apply a floor once book value approaches the asset's salvage value.
How to Use This Calculator
- Choose Straight-Line Method or Declining-Balance Method.
- For Straight-Line, enter Asset Cost, Salvage Value, and Useful Life in years.
- For Declining-Balance, enter Current Book Value and Depreciation Rate as a percentage.
- Select Calculate to see the depreciation expense (and new book value, for the declining-balance method).
Related Calculations
See how another major operating expense builds up with the Cost of Goods Sold Calculator, or check whether pricing covers fixed costs with the Break-Even Point Calculator.