Free Depreciation Calculator – Straight Line & Declining Balance

How the Depreciation Calculator Works Out Book Value

Depreciation is how accounting spreads the cost of an asset across the years you actually use it, rather than dumping the whole expense into the month you bought it. This calculator takes an asset's purchase cost, its estimated salvage value at the end of its life, and that life in years, then produces the annual depreciation charge, the closing book value for each year, and a complete schedule. Small business owners preparing accounts, accountants checking a client's fixed-asset register, and anyone budgeting for equipment replacement all need these numbers. It also answers the practical question of what a machine or vehicle is still worth on paper three years in. Two methods, two different shapes. Straight-line charges an equal amount every year: annual depreciation = (cost − salvage) ÷ life. Declining balance front-loads the charge by applying a fixed percentage to the remaining book value, so each year's amount is smaller than the last. This tool uses the double-declining rate of 2 ÷ life. Salvage value is the estimated resale or scrap value at the end, and depreciation is only ever charged on the gap between cost and salvage — the book value stops falling once it reaches salvage, so an asset is never written down below what it is worth. Choosing a method is a judgement call: straight-line for assets that wear evenly like furniture and buildings, declining balance for anything that loses most of its value early. Take a ₹1,00,000 machine with a ₹10,000 salvage value and a five-year life. Straight-line gives (1,00,000 − 10,000) ÷ 5 = ₹18,000 every year, with book value falling in even steps to ₹10,000 at the end of year five. Double-declining uses a rate of 2 ÷ 5 = 40 per cent, so year one charges ₹40,000 and leaves ₹60,000; year two charges 40 per cent of ₹60,000 = ₹24,000 leaving ₹36,000; then ₹14,400, ₹8,640, and finally ₹2,960 in year five, capped so the book value lands exactly on ₹10,000. Same asset, same total of ₹90,000 written off, but ₹64,000 of it gone in the first two years instead of ₹36,000. The practical uses are concrete. A small manufacturer buying a ₹1,00,000 machine uses straight-line for the annual accounts because a flat ₹18,000 is easy to budget and easy to explain. A courier business buying vans picks declining balance, since a van genuinely loses a large chunk of its value the moment it leaves the showroom. An IT department planning laptop refresh cycles uses the schedule to see when book value drops low enough that replacement makes financial sense. And a business selling an asset partway through its life compares the sale price against the book value in that year to work out whether the disposal produces a profit or a loss on the books. Lenders reviewing a loan application often ask for the same figure, since the book value of plant and machinery feeds directly into the balance sheet they assess. One thing beginners consistently get wrong: this is accounting depreciation, not tax depreciation. Tax authorities prescribe their own rates and methods — India's Income Tax Act uses block-of-assets written-down-value rates that differ from anything here — so the number in your books and the number on your return are often different figures for the same asset, and both are correct in their own context. Salvage value is also an estimate, not a fact; setting it too high understates your annual charge for years. Useful life should reflect how long you will actually use the asset, not how long it could theoretically last. Treat these results as planning and bookkeeping figures, and have a qualified accountant confirm the method for statutory reporting. Everything runs in your browser, so your asset figures are never uploaded or stored.

Depreciation Calculator Formula & Method

🔥 Trending Tools