Annual depreciation = (Cost - Salvage Value) / Useful Life. Same amount each year. Simplest method, suitable for assets that lose value evenly, like office furniture and buildings.
Accelerated depreciation: Annual depreciation = Beginning Book Value × (2 / Useful Life). More depreciation in early years, less later. Switches to straight-line in final two years. Ideal for technology that becomes obsolete quickly.
Annual depreciation = (Cost - Salvage Value) × (Remaining Life / Sum of Years). Sum of Years = n(n+1)/2. Depreciation decreases each year, but more gradually than DDB.
Depreciation is the systematic allocation of a fixed asset's cost over its useful life. It reflects the gradual loss of value as the asset is used over time.
Annual depreciation = (Cost - Salvage Value) / Useful Life. The same amount is depreciated each year.
Annual depreciation = Beginning Book Value × (2 / Useful Life). More depreciation in early years, switches to straight-line in final two years.
Annual depreciation = (Cost - Salvage Value) × (Remaining Life / Sum of Years). Sum of Years = n(n+1)/2. Depreciation decreases gradually.
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