📊 Depreciation Calculator

Choose a depreciation method: Straight-Line, Declining Balance, Sum-of-Years' Digits, or Units of Production.
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📖 Depreciation Methods Explained

Straight-Line Depreciation

The most commonly used method. It spreads the cost of an asset evenly over its useful life. Each year, the same amount of depreciation is recorded.

Annual Depreciation = (Cost − Salvage Value) ÷ Useful Life
Example: A machine costs $10,000, has a salvage value of $2,000, and a useful life of 4 years.
Depreciation per year = ($10,000 − $2,000) ÷ 4 = $2,000/year

The book value decreases by the same amount every year until it reaches the salvage value at the end of the asset's life.

✅ Pros

  • Simple to calculate
  • Easy to understand and apply
  • Consistent expense each period
  • Widely accepted (GAAP & IFRS)

❌ Cons

  • Doesn't reflect actual usage
  • Ignores accelerated wear in early years
  • May overstate asset value early on

Declining Balance Depreciation

An accelerated method that records higher depreciation in early years and less in later years. It applies a fixed percentage rate to the remaining book value each year.

Depreciation = Book Value at Beginning of Year × Depreciation Rate
Double-Declining Rate = (1 ÷ Useful Life) × 2
Example: A $10,000 asset with 5-year life (DDB rate = 40%).
Year 1: $10,000 × 0.40 = $4,000
Year 2: $6,000 × 0.40 = $2,400
Year 3: $3,600 × 0.40 = $1,440
...and so on, until book value reaches salvage value.

The depreciation amount decreases each year because it's always a percentage of the shrinking book value. The asset is never depreciated below its salvage value.

✅ Pros

  • Higher deductions in early years (tax benefit)
  • Better matches revenue for assets that lose value quickly
  • Reflects reality for tech/vehicles

❌ Cons

  • More complex to calculate
  • Lower profits reported in early years
  • May need to switch to straight-line near end

Sum-of-Years' Digits (SYD)

Another accelerated method. It assigns a fraction to each year based on the remaining life, resulting in higher depreciation in earlier years.

SYD = n(n + 1) ÷ 2   (where n = useful life)
Depreciation = (Remaining Life ÷ SYD) × Depreciable Amount
Example: Asset cost $10,000, salvage $1,000, useful life 4 years.
SYD = 4(5) ÷ 2 = 10
Year 1: (4/10) × $9,000 = $3,600
Year 2: (3/10) × $9,000 = $2,700
Year 3: (2/10) × $9,000 = $1,800
Year 4: (1/10) × $9,000 = $900

Unlike declining balance, SYD always fully depreciates the asset down to exactly the salvage value by the end of the useful life.

✅ Pros

  • Accelerated — higher early deductions
  • Always depreciates to exact salvage value
  • Smooth, predictable decline

❌ Cons

  • More complex than straight-line
  • Less commonly used in practice
  • Fractions can be confusing

Units of Production Depreciation

This method ties depreciation directly to actual usage or output. The more an asset is used in a given period, the more depreciation is charged.

Depreciation per Unit = (Cost − Salvage) ÷ Total Estimated Units
Annual Depreciation = Depreciation per Unit × Units Produced That Year
Example: A machine costs $50,000, salvage $5,000, expected to produce 100,000 units.
Dep. per unit = ($50,000 − $5,000) ÷ 100,000 = $0.45/unit
If Year 1 produces 25,000 units → $11,250
If Year 2 produces 30,000 units → $13,500

This method is ideal for manufacturing equipment, vehicles (based on miles driven), or any asset whose wear depends on usage rather than time.

✅ Pros

  • Most accurate reflection of actual usage
  • Matches expense to revenue generated
  • Fair for seasonal or variable-use assets

❌ Cons

  • Requires tracking actual output/usage
  • Total units must be estimated upfront
  • Not suitable for all asset types

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