1. What is Straight Line Depreciation?

Straight line depreciation is the simplest method of allocating the cost of a tangible asset over its useful life. It assumes the asset will lose an equal amount of value each year.

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: The formula spreads the depreciable amount (cost minus salvage value) evenly over the asset's useful life.

3. Importance of Depreciation Calculation

Details: Proper depreciation calculation is essential for accurate financial reporting, tax purposes, and business decision-making regarding capital assets.

4. Using the Calculator

Tips: Enter the original cost of the asset, estimated salvage value, and useful life in years. All values must be positive numbers with salvage value less than cost.

5. Frequently Asked Questions (FAQ)

Q1: When is straight line depreciation most appropriate?
A: It works best for assets that lose value evenly over time and don't have major repair costs that increase with age.

Q2: What's the difference between straight line and accelerated depreciation?
A: Accelerated methods (like double declining balance) write off more value in early years, while straight line is consistent.

Q3: How do I determine salvage value?
A: Estimate what the asset could be sold for at end of its useful life. If unknown, many companies use $0.

Q4: Can I change depreciation methods later?
A: Generally no, unless you can demonstrate the new method better matches the asset's use pattern (requires justification).

Q5: How does this affect taxes?
A: For tax purposes, you may need to use MACRS (Modified Accelerated Cost Recovery System) instead of straight line.