Straight-Line Depreciation
Straight-Line Depreciation
Straight-line depreciation spreads an asset’s loss in value evenly over its useful life — the simplest accounting method.
The annual depreciation is D = (C − S)/n. where C is the cost, S the salvage value and n the useful life in years.
Inputs
C := 40000=40000
S := 5000=5000
n := 7=7
Spread the depreciable amount over the life.
D := (C - S)/n=5000
Results
Each year the asset loses the same amount on the books. Other methods (declining balance) front-load the depreciation instead.
Assumptions & limitations
- Straight-line method.
- Constant salvage estimate.
- Whole-year periods.