What is Asset Depreciation?

Depreciation is an accounting method used to allocate the cost of a tangible asset over its useful life. It represents how much of an asset's value has been used up. Businesses use depreciation for both tax and accounting purposes to match the expense of using an asset to the income it helps generate.

How to Use This Calculator

Our Depreciation Calculator allows you to quickly generate a full schedule for your business assets. Simply enter the initial cost of the asset, the estimated salvage value (what you expect the asset to be worth at the end of its life), and the total number of years you expect to use it. You can choose between the Straight-Line method, which spreads the cost evenly, or the Double Declining Balance method, which accelerates the expense in the earlier years.

Straight-Line vs. Double Declining Balance

The Straight-Line method is the simplest way to calculate depreciation. It results in a constant expense every year. Formula: (Cost - Salvage Value) / Useful Life.

The Double Declining Balance (DDB) method is an accelerated depreciation technique. It results in higher depreciation expenses in the early years of an asset's life and lower expenses in later years. This is often used for assets that lose value quickly, such as vehicles or technology equipment.

Frequently Asked Questions

What is Salvage Value? It is the estimated resale value of an asset at the end of its useful life.

Why is depreciation important? It helps businesses reduce their taxable income and provides a more accurate picture of a company's profitability by spreading out large capital expenses.

Which method should I choose? While the straight-line method is common for financial reporting, accelerated methods like DDB are often preferred for tax benefits.