Asset Depreciation Calculator

What is Depreciation?

Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life. It represents how much of an asset's value has been used up. For businesses, depreciation is a crucial non-cash expense that reduces taxable income. For individuals, understanding depreciation (especially for cars) helps in understanding the true cost of ownership.

Depreciation Methods Explained

1. Straight Line (SL)

The simplest and most common method. The asset loses the same amount of value every year.
Formula: (Cost - Salvage Value) / Useful Life

2. Double Declining Balance (DDB)

An accelerated method where more depreciation is expensed in the early years. This is often used for assets that lose value quickly, like computers or vehicles.
Formula: (2 / Useful Life) * Book Value at Beginning of Year

3. Sum of Years' Digits (SYD)

Another accelerated method that is smoother than Double Declining but faster than Straight Line. It uses a fraction based on the sum of the digits of the asset's life (e.g., for 5 years: 1+2+3+4+5 = 15).

Why Salvage Value Matters

The Salvage Value (or Residual Value) is the estimated amount that an asset is worth at the end of its useful life. Depreciation stops once the asset's "Book Value" hits the Salvage Value. You cannot depreciate an asset below its scrap value.