Depreciation Calculator

Depreciation Calculator Guide

A depreciation calculator computes annual expense, accumulated depreciation, and book value using methods like Straight-Line (SL), Double-Declining Balance (DDB), Sum-of-Years'-Digits (SYD), and Units of Production (UoP). It helps plan budgets and compare accounting policies.

What is Depreciation Calculator?

The depreciation calculator turns asset cost, salvage value, useful life (years or units), and in-service dates into depreciation schedules. It is useful for fixed-asset planning, management reporting, and prelim tax estimates.

How to Use the Depreciation Calculator

1. Enter asset cost, salvage value, and useful life (years or total units).
2. Choose a method: SL, DDB, SYD, or UoP.
3. (Optional) set a convention (half-year, mid-quarter) or partial-year months.
4. Calculate annual (or monthly) depreciation and running book value.
5. Export the schedule for your ledger or proposal.

Formulas & Methods

• Straight-Line (SL):
  Annual = (Cost - Salvage) / Life_years
Book_t = Cost - Annual * t
• Double-Declining Balance (DDB):
  Rate = 2 / Life_years
Expense_t = Rate * Book_(t-1) (cap so Book_t >= Salvage); often switch to SL when SL > DDB.
• Sum-of-Years'-Digits (SYD):
  Den = n(n+1)/2 with n = Life_years
Expense_t = (Remaining_years / Den) * (Cost - Salvage)
• Units of Production (UoP):
  Rate_per_unit = (Cost - Salvage) / Total_units
Expense = Units_in_period * Rate_per_unit

Assumptions & limitations

• Methods reflect accounting policies, not asset valuation.
• Tax rules (MACRS, bonus) differ; this tool is for planning, not tax filing.
• Salvage and life are estimates; revisit when facts change.

Examples

Example A — Straight-Line
Cost $50,000, Salvage $5,000, Life 5 y -> Annual = (50,000 - 5,000)/5 = $9,000.
After 3 years: Book = 50,000 - 3*9,000 = $23,000.

Example B — DDB with switch
Cost $20,000, Salvage $2,000, Life 4 y. Rate = 2/4 = 50%.
Year 1: Expense = 0.5*20,000 = 10,000 -> Book 10,000.
Year 2 (DDB): 0.5*10,000 = 5,000 -> Book 5,000.
Year 3: SL on remaining (5,000 - 2,000)/2 = 1,500 beats DDB 0.5*5,000 = 2,500 only until salvage guard—switch ensures end at salvage.

| Method | Early Expense | Total over Life | Notes | |---|---|---|---| | SL | Even | Cost - Salvage | Simplest | | DDB | Highest early | Cost - Salvage | Switch to SL late | | SYD | Medium early | Cost - Salvage | Smooth acceleration | | UoP | Varies with use | Cost - Salvage | Needs usage data |

Pro Tips & Best Practices

• Document your policy (method, life, convention) and apply consistently.
• Reassess useful life if usage or maintenance changes materially.
• Keep supporting schedules for auditors and tax preparers.
• For fleet/equipment, UoP aligns expense with revenue when usage varies.

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FAQ

Q: Which depreciation method should I use?

A: Straight-line is simplest; DDB accelerates early write-offs; SYD is a middle ground; Units-of-production ties expense to usage.

Q: How is salvage value handled?

A: Depreciation stops once the book value reaches the estimated salvage value.

Q: Can I switch methods?

A: Some policies allow switching from accelerated (DDB) to straight-line when it yields higher expense; follow your accounting policy.

Q: What about partial-year assets?

A: Prorate the first/last year by months in service or use a convention (e.g., half-year).

Q: Is this tax advice?

A: No—this tool is for general planning; consult your accountant for tax rules.

Compliance note: This article is for information only and not financial advice.

Call to Action

Enter cost, salvage, and life, pick a method, and generate a schedule—compare SL vs DDB vs SYD to match your reporting goals.