Depreciation Calculator: Straight-Line and Declining
Enter an asset's cost, salvage value and useful life, pick a depreciation method and the year to see, and get that year's expense, accumulated depreciation and book value. It spreads a cost over time for accounting; it does not measure how fast an investment pays itself back.
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Formula
- Straight-line:
(cost - salvage) / life - Declining balance:
book value at start of year x (factor / life), never below salvage. Factor 2 is double declining. - Sum of years' digits:
(cost - salvage) x (life - n + 1) / (life x (life + 1) / 2)for year n. - Book value:
cost - accumulated depreciation.
In the final year the declining balance amount is set so the book value ends exactly at the salvage value.
Worked example
Cost 10,000, salvage 1,000, life 5 years (depreciable amount 9,000).
| Year | Straight-line | Double declining | Sum of years' digits |
|---|---|---|---|
| 1 | 1,800 | 4,000 | 3,000 |
| 2 | 1,800 | 2,400 | 2,400 |
| 3 | 1,800 | 1,440 | 1,800 |
| 4 | 1,800 | 864 | 1,200 |
| 5 | 1,800 | 296 | 600 |
Every method totals 9,000. After year 2 the straight-line book value is 6,400 and the sum-of-years book value is 4,600.
Another example
A 24,000 machine, no salvage value, 4 years.
| Year | Straight-line | Double declining | Sum of years' digits |
|---|---|---|---|
| 1 | 6,000 | 12,000 | 9,600 |
| 2 | 6,000 | 6,000 | 7,200 |
| 3 | 6,000 | 3,000 | 4,800 |
| 4 | 6,000 | 3,000 | 2,400 |
When to use it
Choose straight-line for even use, and a declining method when an asset loses value or usefulness faster early on. Check local tax rules for the schedule you must actually use.
How it differs
Depreciation allocates a purchase cost across years of use in the accounts. The payback period calculator asks how long cash flows take to recover the price, and net present value discounts those flows. A fully depreciated asset can still be paying back, and vice versa.
Frequently asked questions
How is straight-line depreciation calculated?
Subtract the salvage value from the cost and divide by the useful life. An asset costing 10,000 with a salvage value of 1,000 and a 5-year life loses (10,000 - 1,000) / 5 = 1,800 each year.
How does declining balance depreciation work?
Each year the depreciation is the book value at the start of the year times a fixed rate, where the rate is the factor divided by the life. With a factor of 2 and a 5-year life the rate is 40%, so year 1 is 4,000, year 2 is 2,400 and year 3 is 1,440. The book value is never taken below the salvage value.
What is sum-of-the-years'-digits depreciation?
The depreciable amount is multiplied by the years remaining divided by the sum of the digits of the life. For 5 years the sum is 1+2+3+4+5 = 15, so year 1 is 9,000 x 5/15 = 3,000, then 2,400, 1,800, 1,200 and 600.
What is book value?
Book value is the cost minus the accumulated depreciation. After two years of sum-of-years depreciation in the example it is 10,000 - 5,400 = 4,600.
Does this follow tax depreciation rules?
No. Tax rules differ by country and often use fixed schedules or special rates. This calculator shows the standard accounting methods, so check local rules and ask an accountant before using it for a tax return.
How do I calculate depreciation in Excel?
Excel has a function for each method. =SLN(10000,1000,5) gives 1,800 for straight-line, =DDB(10000,1000,5,1) gives 4,000 for double declining balance in year 1, and =SYD(10000,1000,5,1) gives 3,000 for sum of years' digits in year 1. The arguments are cost, salvage, life and period.
Which depreciation method should I use?
Straight-line is the simplest and suits assets that give even benefit each year. Declining balance and sum of years' digits put more expense in the early years, which suits assets such as vehicles or computers that lose value fastest when new. All methods total the same 9,000 over the life in the example.
Can salvage value be zero?
Yes. If you expect the asset to have no resale value, enter 0 and the whole cost is depreciated. A 24,000 machine over 4 years with no salvage value loses 24,000 / 4 = 6,000 a year on a straight-line basis.