Depreciation Calculator

What depreciation represents

Most business assets lose value as they are used, and depreciation is the accounting method that spreads that loss across the years the asset actually serves, rather than recording the entire cost in the month of purchase. It matters for two practical reasons: it produces a truer picture of yearly profit, and in most tax systems the depreciation charge is deductible.

The formula behind it

Straight-line depreciation, the simplest and most widely used method, is (cost − salvage value) ÷ useful life. A machine bought for 50,000 with an expected residual value of 5,000 after nine years depreciates by (50,000 − 5,000) ÷ 9 = 5,000 a year. Book value falls by that amount annually until it reaches the salvage figure, where it stops.

How to use this calculator

Enter the asset cost, the salvage value you expect at the end of its life and the useful life in years. The result shows the annual depreciation charge and how the book value declines year by year — the schedule your accounts and tax return will need.

Other methods, and the limits

Straight-line assumes value is lost evenly, which suits buildings and furniture. Assets that lose most value early — vehicles and computers especially — are often better matched by declining-balance or sum-of-years methods, which front-load the charge. Tax authorities frequently mandate specific rates and lives regardless of your own estimate, so treat this calculation as management information and confirm the treatment your jurisdiction requires.