1. What is Straight-Line Depreciation?

The straight-line depreciation method is the simplest way to calculate depreciation expense. It allocates an equal amount of depreciation each year over the asset's useful life, following the formula: (Cost - Salvage Value) / Useful Life.

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 in years

Explanation: This method spreads the depreciable amount evenly over the asset's useful life.

3. Importance of Depreciation Calculation

Details: Proper depreciation calculation is essential for accurate financial reporting, tax compliance, and business decision-making in the Philippines.

4. Using the Calculator

Tips: Enter the asset's cost in PHP, estimated salvage value, and useful life in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Is straight-line depreciation required in the Philippines?
A: While straight-line is common, Philippine accounting standards allow other methods if they better reflect asset usage patterns.

Q2: What's the typical useful life for common assets?
A: Buildings (20-50 years), vehicles (5-10 years), computers (3-5 years), but consult BIR regulations for tax purposes.

Q3: How is salvage value determined?
A: It's an estimate of the asset's value at disposal. For tax purposes in PH, BIR may prescribe minimum salvage values.

Q4: Can I change depreciation methods later?
A: Changes require justification and may need BIR approval for tax purposes in the Philippines.

Q5: How does this affect tax payments?
A: Depreciation reduces taxable income, but must comply with BIR's prescribed rates for tax deductions.