Depreciation Calculator
A full schedule by straight line, double declining balance, or sum of the years digits.
| Year | Expense | Accumulated | Book value |
|---|---|---|---|
| 1 | $9,000 | $9,000 | $41,000 |
| 2 | $9,000 | $18,000 | $32,000 |
| 3 | $9,000 | $27,000 | $23,000 |
| 4 | $9,000 | $36,000 | $14,000 |
| 5 | $9,000 | $45,000 | $5,000 |
Every method writes off the same total, cost minus salvage; they differ only in timing. Accelerated methods pull deductions forward, which is worth real money in present-value terms. No method ever depreciates below salvage value.
Depreciation spreads the cost of an asset across the years it is used, matching the expense to the benefit rather than taking it all at purchase. Every method writes off the same total, cost minus salvage value. They differ only in timing.
Worked example. A $50,000 machine with a $5,000 salvage value over five years has $45,000 to depreciate. Straight line takes $9,000 a year. Double declining takes $20,000 in year one and tapers. Sum of the years digits takes $15,000 first, then $12,000, and so on.
Frequently asked questions
Which method should I use?
For financial statements, whichever best reflects how the asset is consumed; straight line is the most common because it is simple and predictable. For US tax, MACRS is generally required, which is its own accelerated system with prescribed lives, so book and tax depreciation often differ.
What is salvage value?
The estimated worth of the asset at the end of its useful life. It is subtracted from cost to get the depreciable base, and no method may depreciate below it. Many companies assume zero salvage for simplicity, which maximises the deduction.
What is the difference between depreciation and amortization?
Depreciation applies to tangible assets like equipment and buildings; amortization applies to intangibles like patents and software. The arithmetic is the same, and both are added back to operating income to get EBITDA.
Does depreciation affect cash flow?
Not directly, because no cash moves when the expense is recorded. It does affect cash indirectly by lowering taxable income and therefore tax paid, which is why it is added back at the top of a cash flow statement.
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Calculators model hypothetical outcomes from the inputs you provide. They are informational only, not financial, investment, tax, or legal advice.