Accountant how-to
How to Calculate Straight-Line Depreciation
Straight-line depreciation spreads an asset’s cost evenly over its useful life.
Straight-line depreciation spreads an asset’s cost evenly over its useful life. In short: determine; estimate; estimate, then complete the remaining steps below.
Step by step
Determine the asset’s cost, including delivery and installation.
Estimate its salvage (residual) value.
Estimate its useful life in years.
Subtract salvage value from cost to find the depreciable base.
Divide by useful life. Example: an asset costing 50,000 dollars with 5,000 dollars of salvage value and a 5-year life depreciates 9,000 dollars per year.
Record a debit to depreciation expense and a credit to accumulated depreciation each period.
Safety reminders for accountants
- Maintain independence and objectivity, especially in audits
- Protect confidential financial and taxpayer data
- Follow professional ethics codes such as the AICPA Code of Professional Conduct
- Report suspected fraud through proper channels
Key terms
GAAP · FASB · Accrual accounting · Financial statements · Audit · Internal controls: see the full accountant glossary.