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Table of Content
Table of Content
Want to calculate depreciation? This smart depreciation calculator helps to calculate depreciation by using four different methods to estimate how fast the value of an asset decreases over time.
You can use this depreciation rate calculator to compare the given depreciation methods and decide which one suits you best!
So, before knowing about this finance calculator, let’s start with some basics!
Depreciation is said to be a non-cash expense that reduces the value of an asset as a result of age, wear and tear, or obsolescence over the period of its useful life. In generic term, depreciation is the decrease in value.
If a delivery truck is purchased by a company that cost is $ 100,000 and the expected usage of the truck are 5 years, then the business might depreciate the asset under depreciation expense as $ 20,000 every year for a period of 5 years. Also, you can try the vehicle depreciation calculator to know the depreciated expense for your vehicle.
There are various methods that are used by the companies to perform depreciation calculation, but the most common methods are:
Straight Line Depreciation or SLD is a very common and the simplest method that helps to calculate depreciation expense. In simple words, with straight-line depreciation, the expense amount is the same every year over the useful life of an asset. The SLD incorporates a salvage value (an estimated value that an owner would receive when selling an asset at the end of its useful life. Now, you might be thinking that how to calculate depreciation expense, don’t fret! If your preferred method for depreciation is a straight line, then you can use the above straight line depreciation calculator to calculate your depreciation expense. Sometimes, the SLD method also referred to as a fixed installment method. Read on to know depreciation expense formula for SLD:
Annual Depreciation Expense = (Cost of an asset – Salvage Value)/Useful life of an asset
Well, this depreciation method is one that involves a double depreciation rate. The DDD reflects the fact that assets are often more productive in their early years than in their later years.
Additionally, the practical fact reveals that any asset (think of buying a new car) loses more its value in the very first few years of its use. Yes, with the DDD balance method, the depreciation factor is 2x that of the SLD or Straight Line Depreciation method. However, our double declining depreciation calculator also considers the same factor while creating a depreciation schedule.
Annual Depreciation Expense = 2 x (Cost of an asset – Salvage Value)/Useful life of an asset
The double declining balance depreciation expense formula is:
Depreciation Expense = 2 x Cost of the asset x depreciation rate
The Sum of Year’s Digits Method is known as an accelerated depreciation method that recognizes depreciation at an accelerated rate. That’s why the depreciable amount of an asset is charged to a fraction over different accounting period under this sum of year’s digit method.
This fraction is said to be the ratio between the remaining useful life of an asset within a particular and sum of the year’s digits. Thus, this fraction referred to as the capital blocked or the benefit that is derived out of the asset is the highest in the first year.
So, as an asset is moving towards the end of its useful life, the benefit that gained out such asset declines. It is said to be as the highest amount of depreciation is allocated in the first year since no amount of capital was recovered till then. Thus, the least amount of depreciation must be charged in the last year as the major portion of capital invested was recovered.
The depreciation equation for sum of years’ digits method is given below:
Depreciation Expense = Depreciable Cost x (Remaining useful life of the asset/Sum of Years’ Digits
Depreciable cost = Cost of asset – Salvage Value
Sum of years’ digits = (n(n +1))/2 (where n = useful life of an asset)
Reducing Balance Depreciation method is also known as diminishing balance method, Written down value method, and Fixed percentage on diminishing balance. According to this method of depreciation, the depreciation is charged on reducing balance & a fixed rate. In such case, depreciation is charged over the useful life of an asset over its written down value.
According to Reducing Balance Method, the percentage at which depreciation is charged remains fixed, and the amount of depreciation goes on diminishing year after year!
Depreciation Expense = (Book value of asset at beginning of the year x Rate of Depreciation)/100
This simple depreciation calculator helps in calculating depreciation of an asset over a specified number of years using different depreciation methods. The calculator allows you to use Straight Line Method, Declining Balance Method, Sum of the Year’s Digits Method, and Reducing Balance Method to calculate depreciation expense. This smart calculator not only helps you to calculate simple depreciation, but also helps to determine car depreciation and property depreciation. Means, this calculator also works property and car depreciation calculator.
You have to follow the given steps to calculate simple depreciation of assets:
Note: When you select Declining Balance Method, the ‘Depreciation Factor’ field appears in which you have to enter the value!
Our car depreciation calculator helps you to calculate how much your car will be worth after a number of years. This calculator for a car depreciation is also estimated the first year and the total vehicle depreciation.
Stick to the following steps to calculate car depreciation expense:
Our property depreciation calculator helps to calculate depreciation of residential rental or nonresidential real property. This calculator performs calculation of depreciation according to the IRS (Internal Revenue Service) that related to 4562 lines 19 and 20.
It is quite easy to use, just follow the given steps to calculate your property depreciation expense:
In fact, it can be difficult to know which depreciation method is suitable for you as there are pros & cons of using each method.
Before choosing between the four different methods of depreciation, you should have to consider the nature of your assets. For instance, you must think about whether they become less productive & useful at an even rate or whether suddenly drop in the value.
Similarly, you should have to consider whether you will utilize your asset at steady intervals, regular or whether it might be idle for long periods of time.
Ultimately, it is essential to consider whether it’s required to utilize the complex depreciation methods or whether a more simple method will work best! However, the larger organizations often want to use the most accurate depreciation method, for most small organizations, businesses, and freelancers, straight-line depreciation is best enough to determine and sufficient for considering how asset declines in value. If you also want to calculate depreciation according to straight-line depreciation, then try straight line depreciation calculator to know how your asset declines in value.