# Depreciation Calculator

> Calculate straight-line depreciation, accumulated depreciation, and book value from cost, salvage, useful life, and elapsed time.

**Category:** Finance
**URL:** https://complete.tools/depreciation-calculator

## How it calculates

The formula for calculating straight-line depreciation is as follows: 

Depreciation Expense per Period = (Cost - Salvage Value) ÷ Useful Life 

Where: 
- Cost = the initial purchase price of the asset 
- Salvage Value = the estimated residual value at the end of its useful life 
- Useful Life = the total number of useful periods (often in years or months) for the asset 

Accumulated Depreciation is calculated by multiplying the Depreciation Expense per Period by the number of periods that have elapsed: 

Accumulated Depreciation = Depreciation Expense per Period × Elapsed Time 

Finally, the Book Value is determined by subtracting the Accumulated Depreciation from the Cost: 

Book Value = Cost - Accumulated Depreciation 

This mathematical relationship allows for the systematic allocation of an asset’s cost over its useful life.

## Who should use this

Accountants preparing financial statements for businesses, real estate appraisers valuing properties based on asset depreciation, and financial analysts assessing the value of equipment in manufacturing industries are specific examples of who can utilize this tool.

## Worked examples

Example 1: A company purchases a machine for $50,000 with a salvage value of $5,000 and a useful life of 10 years. The annual depreciation expense is calculated as follows: 
Depreciation Expense = (50,000 - 5,000) ÷ 10 = $4,500. After 3 years of usage, the accumulated depreciation will be: 4,500 × 3 = $13,500. Thus, the book value after 3 years is: 50,000 - 13,500 = $36,500.

Example 2: A vehicle costs $30,000, has a salvage value of $3,000 and a useful life of 5 years. The depreciation expense per year is: (30,000 - 3,000) ÷ 5 = $5,400. After 2 years, the accumulated depreciation will be: 5,400 × 2 = $10,800. The book value after 2 years would then be: 30,000 - 10,800 = $19,200.

## Limitations

This tool assumes a straight-line depreciation method, which may not be suitable for all asset types, especially those that lose value more rapidly initially or have irregular usage patterns. It also assumes that the salvage value and useful life estimates are accurate; significant changes in these estimates can lead to inaccurate calculations. Additionally, this tool does not account for tax implications or inflation, which can affect the real value of depreciation. Lastly, the precision of results can be limited by rounding errors if input values are not precise.

## FAQs

**Q:** How does salvage value affect depreciation calculations?


**A:** Salvage value decreases the amount that is depreciated over the asset's useful life, thus increasing the book value at the end of that life.


**Q:** Can this tool be used for assets with varying useful lives?


**A:** No, this tool specifically calculates straight-line depreciation, which assumes a constant useful life throughout the asset's duration.


**Q:** What happens if the asset is sold before the end of its useful life?


**A:** If an asset is sold, accumulated depreciation must be calculated up to the sale date, and any gain or loss on the sale is determined by comparing the sale price to the book value at that point.


**Q:** Is it possible to apply this tool for monthly depreciation?


**A:** Yes, by adjusting the useful life and elapsed time to reflect months instead of years, the tool can be used for monthly depreciation calculations.

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*Generated from [complete.tools/depreciation-calculator](https://complete.tools/depreciation-calculator)*