What depreciation is and why it matters
When a business buys a long-lived asset — a vehicle, a machine, a computer — it does not record the whole cost as an expense in the year of purchase. Instead the cost is spread across the years the asset is expected to be useful, matching the expense to the periods that benefit from it. That spreading is depreciation, and the amount still on the books after each year is the asset's book value.
Two figures bound the process. The cost is what you paid, and the salvage value is what you expect the asset to be worth at the end of its life. The difference between them — the depreciable base — is the total amount that gets written off over the asset's useful life. No method depreciates below salvage value.
The three methods compared
This calculator supports the three classic schedules, and the choice changes the timing of the expense, not the total:
- Straight-line writes off an equal slice every year. It is the simplest and the most common for steady, predictable assets.
- Declining balance (200%) applies double the straight-line rate to the shrinking book value, front-loading the expense into early years — useful for assets that lose value fast.
- Sum-of-the-years-digits also front-loads expense but tapers it more gently than declining balance, sitting between the other two.
Reading the schedule and chart
The headline figure is the first-year depreciation, where the differences between methods are most pronounced. The table lists each year's depreciation, the running accumulated total, and the remaining book value.
The line chart traces book value falling from cost toward salvage. A straight-line method produces a straight descent; accelerated methods curve steeply at first and flatten as the asset nears its salvage floor.
A note on tax and accounting rules
These are general accounting methods for estimation. Tax depreciation often follows prescribed systems and conventions (such as specific recovery periods, half-year rules, or bonus depreciation) that differ from book depreciation and vary by jurisdiction and year. Use this tool for planning and understanding, and consult an accountant or current tax guidance before filing.
Formula
Straight-line: (cost − salvage) / life. Declining-balance: bookValue × 2/life. Sum-of-years-digits: (cost − salvage) × remainingLife / Σyears.Frequently asked questions
- Which method should I use?
- Straight-line is the simplest and most common. Declining-balance and sum-of-years-digits are accelerated methods that recognize more expense in early years, which can match assets that lose value quickly.