Depreciation Calculator

What a Depreciation Calculator Does

A Depreciation Calculator helps you estimate how the cost of an asset is allocated over time for accounting and planning purposes. Depreciation does not necessarily measure market value changes. Instead, it is a systematic method for recognizing the cost of using a tangible asset across the periods that benefit from it. Businesses use depreciation to match expense recognition with revenue generation, to track asset book value, and to support budgeting, reporting, and analysis.

This Depreciation Calculator supports multiple common book depreciation methods. You can calculate straight-line depreciation for a simple and consistent annual expense, choose accelerated methods such as declining balance (including double-declining balance) and sum-of-years digits for higher early depreciation, or use units of production when depreciation should be driven by actual usage. The calculator also builds schedules so you can see accumulated depreciation and ending book value each period.

Key Terms: Cost, Salvage Value, Useful Life, and Book Value

Asset cost (basis)

Asset cost is the starting value used for depreciation. It often includes purchase price plus costs necessary to place the asset into service, such as installation, delivery, or setup costs. For planning, many people treat the basis as the all-in acquisition cost.

Salvage value (residual value)

Salvage value is the expected value of the asset at the end of its useful life. Most book depreciation methods stop once book value reaches salvage value, which prevents over-depreciating the asset. If salvage value is set too low or too high, your depreciation expense pattern can become unrealistic for reporting.

Useful life

Useful life is the time period over which the asset is expected to provide economic benefit. A longer useful life spreads the cost across more periods, lowering annual depreciation. A shorter useful life increases annual depreciation. Useful life can be set by internal policy, industry norms, or accounting guidance, depending on the reporting framework.

Book value and accumulated depreciation

Book value is the asset’s carrying value on the balance sheet. It is calculated as cost minus accumulated depreciation. Accumulated depreciation is the cumulative total of depreciation expense recognized to date. A schedule is the best way to track these values over time because it shows both the current-period expense and the running total.

Straight-Line Depreciation: The Most Common Method

Straight-line depreciation is widely used because it is simple and produces a consistent expense each year. It assumes the asset provides value evenly over its life. The depreciable base is cost minus salvage value, and the annual depreciation is the depreciable base divided by the useful life.

Straight-line is often preferred for assets with stable usage patterns, such as office furniture or standard equipment. It is also easier to forecast because the depreciation expense is predictable and uniform.

Declining Balance and Double-Declining Balance

Declining balance methods are accelerated. They recognize more depreciation earlier in the asset’s life and less later. This can make sense when an asset is more productive or more quickly outdated in the early years, or when you want expense recognition to align with higher early benefits or higher early maintenance efficiency.

Double-declining balance is a common accelerated approach. It applies twice the straight-line rate to the beginning book value each year. Because it is calculated on the declining book value, the depreciation amount decreases over time. Many accounting schedules switch to straight-line near the end to avoid dropping below salvage value and to complete depreciation by the end of the useful life.

This calculator includes a switch-to-straight-line option, which checks whether straight-line on the remaining life would produce a higher depreciation amount and still preserve salvage value. If so, it switches methods for the remaining periods.

Sum-of-Years Digits Depreciation

Sum-of-years digits (SYD) is another accelerated method. It uses a fraction that declines each year. The denominator is the sum of digits for the asset’s useful life. For example, a 5-year life has a denominator of 1+2+3+4+5 = 15. The numerator starts at 5 in year 1, then 4 in year 2, and so on. This produces a high depreciation amount early and lower amounts later.

SYD is sometimes chosen when you want acceleration but prefer a smoother pattern than double-declining balance. It can also be useful for modeling assets that lose utility more quickly early on but still provide meaningful value later.

Units of Production Depreciation

Units of production ties depreciation to actual usage rather than time. This is useful for assets like vehicles, machines, or equipment where wear and tear is directly related to miles driven, hours used, or units produced. Instead of spreading cost evenly per year, you spread cost evenly per unit of output.

Units of production is often the most realistic representation of consumption when an asset’s usage varies significantly from period to period. It can also be helpful for internal cost accounting, where depreciation is treated as part of per-unit production cost.

Why Schedules Are Important for Depreciation

A single depreciation number is not always enough. Most accounting and planning needs require a schedule that includes the current period depreciation expense, accumulated depreciation, and ending book value. A schedule helps you forecast future expenses, reconcile fixed asset registers, verify book value, and assess whether your depreciation assumptions still make sense as the asset ages.

This Depreciation Calculator builds schedules for all supported methods. You can choose a yearly schedule or a simple monthly schedule view. The schedule can be exported to CSV to use in spreadsheets or accounting documentation.

Comparing Depreciation Methods for Better Decisions

Depreciation method choice changes the timing of expenses. Accelerated methods reduce early book value faster and increase early expenses, which can affect financial statement ratios, profit timing, and internal budgeting. Straight-line creates smoother reporting. Units of production links expense to operational activity. There is no universal “best” method; the right method depends on how the asset is used and how you need to report.

The Compare tab provides a quick way to see how year-one depreciation and early book value differ by method. This is useful when you are evaluating what pattern aligns best with the asset’s economic reality and your reporting goals.

Limitations and Reporting Considerations

This calculator focuses on common book depreciation methods and uses simplified period logic. Some organizations apply partial-period conventions, such as prorating the first year based on an in-service date, using mid-year conventions, or applying specific accounting framework rules. Tax depreciation systems may use separate methods and tables. Use this tool for planning and book schedules, and confirm compliance with your reporting standards.