Depreciation Calculator

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!

• Straight Line Depreciation Method
• Double Declining Balance Method
• Sum of The Year’s Digits
• Reducing Balance Method

So, before knowing about this finance calculator, let’s start with some basics!

What Is Deprecation?

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.

An example of Depreciation:

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.

What Are the Most Common Methods of Depreciation?

There are various methods that are used by the companies to perform depreciation calculation, but the most common methods are:

Straight Line Method of Depreciation:

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:

Straight Line Depreciation Formula:

Annual Depreciation Expense = (Cost of an asset – Salvage Value)/Useful life of an asset

Where;

• Cost of the asset is said to be a purchase price or historical cost
• Salvage value is the value of the asset remaining after its useful life
• Useful life of the asset is said to be the number of years for which an asset is expected to be used by the business

Double-Declining Depreciation Method (DDD):

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.

Double Declining Depreciation Formula:

Annual Depreciation Expense = 2 x (Cost of an asset – Salvage Value)/Useful life of an asset

Or

The double declining balance depreciation expense formula is:

Depreciation Expense = 2 x Cost of the asset x depreciation rate

Sum of Years’ Digits Method:

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.

Sum of Years’ Digits Depreciation Formula:

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

Where;

Depreciable cost = Cost of asset – Salvage Value

Sum of years’ digits = (n(n +1))/2 (where n = useful life of an asset)

Reducing Balance Method:

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!

Reducing Balance Method Formula:

Depreciation Expense = (Book value of asset at beginning of the year x Rate of Depreciation)/100

Depreciation Calculator:

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.

How to Calculate Depreciation With This Tool:

You have to follow the given steps to calculate simple depreciation of assets:

Inputs:

• First of all, you have to select depreciation method from the drop-down menu (it can be either Straight Line, Declining Balance, Sum of the Year’s Digits, or Reducing Balance Method)
• Very next, you ought to add ‘asset cost’ into the designated field
• Right after, you have to add ‘salvage value’ into the designated field
• Now, you have to add ‘depreciation years’ into the given field
• Then, you can select ‘Yes’ or ‘No’ option from the given field of ‘Round to Dollars’
• Now, you have to select Full-Month, Mid-Month, Mid-Year or Mid-Quarter Convention, if you don’t know, then keep it at the common Full-Month
• At last, you have to enter the date of the asset was placed in service

Note: When you select Declining Balance Method, the ‘Depreciation Factor’ field appears in which you have to enter the value!

Result:

• The calculator instantly shows depreciation schedule year by year. This schedule includes (Beginning Book Value, Depreciation Percent, Depreciation Amount, Accumulated Depreciation Amount, and Ending Book Value)
• Also, our calculator provide you “Ending Book Value Graph Year By Year)

Calculate Car Depreciation With Car Depreciation Calculator:

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:

Inputs:

• First, you have to enter the purchase price of the car into the given field
• Very next, you have to enter the current age of the vehicle – if the car is new, then simply enter ‘0’
• Then, you have to enter the number of years you will own the car
• Now, you have to choose your car’s depreciation rate from the drop-down list. You can select four-car depreciation rates that includes: high, average, low and custom

Results:

• This car depreciation calculator shows your car depreciation schedule year by year including (Beginning Book Value, Depreciation Percent, Depreciation Amount, Accumulated Depreciation Amount, and Ending Book Value)
• Also, the calculator shows you “Ending Book Value Graph” year by year

Calculate Property Depreciation With Property Depreciation Calculator:

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:

Inputs:

• First, you have to enter the original value of your property or the depreciable cost into the designated field
• Then, you have to enter the number of years during which the cost basis of an item of property is recovered
• Now, select ‘Yes’ or ‘No’ from the designated field of Round to Dollars
• Finally, you have to add the month, day, and the year the property started being used for its intended purpose

Results:

• The property depreciation calculator shows your property depreciation schedule year by year, the schedule includes (Beginning Book Value, Depreciation Percent, Depreciation Amount, Accumulated Depreciation Amount, and Ending Book Value)
• Also, shows you the “Ending Book Value Graph Year By Year”

Which depreciation method should I use?

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.