1. What is Depreciation?

Depreciation is the systematic allocation of the cost of an asset over its useful life. It represents how much of an asset's value has been used up. For equipment, this helps businesses account for wear and tear, aging, and obsolescence.

2. How Does the Calculator Work?

The calculator uses the straight-line depreciation formula:

Where:

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

Explanation: This straight-line 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 crucial for financial reporting, tax purposes, and business planning. It affects profit calculations, tax liabilities, and asset valuation on balance sheets.

4. Using the Calculator

Tips: Enter the original cost of equipment, estimated salvage value (if any), and expected useful life in years. All values must be positive numbers with salvage value less than or equal to cost.

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) front-load depreciation or tie it to usage.

Q2: How do I determine useful life?
A: Check manufacturer specifications, industry standards, or tax guidelines (e.g., IRS Publication 946 for US taxpayers).

Q3: What if my equipment has no salvage value?
A: Enter 0 as salvage value. The full cost will be depreciated over the useful life.

Q4: Can I use this for tax purposes?
A: This provides basic calculation, but tax rules may require specific methods or lives. Consult a tax professional.

Q5: How often should I recalculate depreciation?
A: Typically annually, unless there's a significant change in useful life or salvage value estimates.