Depreciation Calculator

How does the Depreciation Calculator work with different depreciation methods?

Our Depreciation Calculator efficiently handles multiple methods of calculating depreciation. Here's a closer look:

Straight Line: This is the simplest method of calculating depreciation. The asset depreciates by an equal amount each year until it reaches its salvage value at the end of its useful life. For instance, if an asset is worth $10,000, has a salvage value of $2,000, and a useful life of 4 years, the annual depreciation is ($10,000 - $2,000) ÷ 4 = $2,000. This method is best for assets that have a consistent utility throughout their life, such as office buildings or non-technical furniture.

Declining Balance: Here, depreciation is calculated as a fixed percentage of the remaining book value, resulting in larger depreciation expenses at the start and progressively smaller ones as the asset ages. For example, using a double declining balance (200%) on a $10,000 asset with a 10-year life would result in a $2,000 depreciation in the first year, and $1,600 in the second year (200% of the remaining $8,000). It's an excellent method for assets like computers or vehicles, which tend to lose their value more rapidly in the initial years.

Sum of the Years Digits: This method takes the sum of the years of the asset's useful life. For a 5-year life asset, the sum would be: 5+4+3+2+1 = 15. In the first year, the depreciation is 5/15 of the depreciable amount, in the second year 4/15, and so on. This method is often chosen for assets like certain specialized machinery where the benefit derived from the asset is highest in the initial years and then decreases.