1. What is Asset Depreciation?

Depreciation is the systematic allocation of the cost of a tangible asset over its useful life. It represents how much of an asset's value has been used up over time.

2. How Does the Calculator Work?

The calculator uses the straight-line depreciation formula:

Where:

• Cost — Original purchase price of the asset
• Salvage Value — Estimated residual value at end of useful life
• Useful Life — Expected service life of the asset in years

Explanation: This method spreads the depreciable amount (cost minus salvage value) evenly over the asset's useful life.

3. Importance of Depreciation Calculation

Details: Accurate depreciation calculation is essential for financial reporting, tax purposes, and business decision-making. It helps match expenses with revenues and provides a more accurate picture of asset values.

4. Using the Calculator

Tips: Enter the original cost of the asset, its estimated salvage value at end of life, and the expected useful life in years. All values must be positive numbers, and cost should be greater than or equal to salvage value.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between straight-line and other depreciation methods?
A: Straight-line is simplest, with equal annual amounts. Other methods (declining balance, units of production) allocate depreciation differently.

Q2: How do I determine salvage value?
A: Estimate what the asset could be sold for at end of its useful life. For many assets, this may be zero.

Q3: What's a typical useful life for common assets?
A: Computers: 3-5 years, Vehicles: 5-10 years, Buildings: 20-40 years. Consult tax guidelines for specifics.

Q4: Can I depreciate land?
A: No, land is generally not depreciated as it doesn't wear out or become obsolete.

Q5: How does this relate to tax depreciation?
A: Tax rules may specify different methods or recovery periods. Consult a tax professional for tax-specific calculations.