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How to calculate Straight-line depreciation

The Straight-line depreciation formula, with plain worked examples you can check yourself.

Straight-line depreciation = (Cost − Salvage) ÷ Life

Worked examples

Cost = 3400 · Salvage = 200 · Life = 8 yrsStraight-line depreciation = 400
Cost = 3800 · Salvage = 300 · Life = 5 yrsStraight-line depreciation = 700
Cost = 1900 · Salvage = 100 · Life = 2 yrsStraight-line depreciation = 900

How to use it

  1. Write down the values for each letter in the formula.
  2. Do the brackets first, then divide or multiply.
  3. Check the units before you compare results.
  4. Compare the answer with last period or with a competitor to see if it is good or bad.

This formula belongs to Costs & Break-even.

Related terms

DepreciationFixed costsVariable costsCost of goods soldOverheadDirect costs

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