What is depreciation?

Depreciation is an accounting method used to allocate the cost of a tangible asset over its useful life. It represents the reduction in the value of an asset due to factors like wear and tear, usage, or obsolescence.

What is the difference between straight-line and accelerated depreciation?

Straight-line depreciation allocates an equal amount of depreciation expense to each year of the asset's useful life. Accelerated methods, like Double Declining Balance and Sum-of-the-Years'-Digits, recognize a larger portion of the depreciation expense in the earlier years of the asset's life and less in the later years.

What is Salvage Value?

Salvage value (or residual value) is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life.

Depreciation Calculator | CalculatorHari.com

Depreciation Schedule

Year	Beginning Book Value	Depreciation Expense	Ending Book Value

Accounting for Wear and Tear

When a business buys a major asset like a vehicle, machinery, or computer system, its value doesn't stay the same. Over time, it wears down and becomes less valuable—a process called **depreciation**. Accounting for this isn't just good practice; it's a critical part of financial reporting and tax planning. By recording depreciation, a business can spread the cost of an asset over its useful life and claim tax deductions along the way.

This calculator is a comprehensive tool that moves beyond a single number. It generates a full **depreciation schedule**, showing exactly how much value the asset loses each year according to the three most common accounting methods. This schedule is essential for creating accurate financial statements and making informed decisions about asset replacement.

Related Financial Planning Tools

Business Loan Calculator: Planning to finance a new asset? Calculate the payments.
Return on Investment (ROI) Calculator: Analyze the profitability of the asset you're depreciating.
Profit Margin Calculator: See how depreciation expense affects your business's net profit.

Frequently Asked Questions (FAQ)

What is Book Value?

The book value of an asset is its original cost minus all the accumulated depreciation that has been recorded against it. This calculator shows the book value at the beginning and end of each year in the schedule.

Why would a company use accelerated depreciation?

Companies often use accelerated depreciation methods (like Double Declining Balance or SYD) for tax purposes. By recognizing a larger depreciation expense in the early years of an asset's life, they can reduce their taxable income more significantly upfront, thus deferring tax payments to later years.

Can I depreciate land?

No, land is a unique asset that is not depreciated because it is considered to have an indefinite useful life. It does not get "used up" in the same way that a building or piece of equipment does. You can, however, depreciate buildings and land improvements.