Straight-Line Depreciation Formula
Straight-line depreciation spreads the cost of an asset evenly over its useful life. It's the simplest and most commonly used depreciation method.
Straight-Line Depreciation
Annual Depreciation = (Cost - Salvage Value) / Useful Life
Where:
- Cost = Original purchase price of the asset
- Salvage = Estimated value at end of useful life
- Life = Useful life in years
Step-by-Step:
- 1
Determine asset cost
Include purchase price, installation, and setup costs.
- 2
Estimate salvage value
What the asset will be worth at the end of its life.
- 3
Divide by useful life
(Cost - Salvage) / Years = annual depreciation expense.
Worked Examples:
Office computer
Cost: ₹80,000Salvage: ₹5,000Life: 5 years
Result: ₹15,000/year
(80,000 - 5,000) / 5 = ₹15,000 annual depreciation