What this calculator does
Depreciation spreads the cost of an asset across the years it is used, rather than expensing it all at purchase. The method chosen changes the timing considerably even though the total written off over the full life is identical.
Straight-line takes the same amount every year. Declining balance front-loads it heavily: a $60,000 asset written down at double declining rate loses $12,000 in its first year against $5,500 under straight-line, which matters for tax timing and for what the balance sheet shows early on.
The formula
Straight-line divides cost less salvage value by the useful life. Declining balance applies a fixed percentage to the remaining book value each year, so the expense shrinks as the value falls, and stops once the salvage floor is reached.
| Term | Meaning |
|---|---|
| Book value | What the asset is carried at after accumulated depreciation is deducted. |
| Salvage value | The estimated worth at the end of its useful life, which depreciation never goes below. |
| Declining balance factor | The multiplier on the straight-line rate. A factor of 2 is the common double declining method. |
The inputs explained
| Field | What to enter |
|---|---|
| Asset cost ($) | The purchase cost of the asset. |
| Salvage value ($) | What the asset is expected to be worth at the end of its useful life. |
| Useful life (years) | The useful life in years over which the asset is written down. |
| Report on year | Which year of the asset's life to report on. |
| Declining balance factor | The declining balance multiplier. Use 2 for double declining, 1.5 for 150 per cent declining. |
When to use it
Comparing methods before choosing
Seeing both side by side shows how much earlier the deduction arrives under declining balance.
Finding current book value
The carrying amount partway through an asset's life is what appears on the balance sheet.
Planning a replacement
Knowing when book value approaches salvage helps time the decision to replace rather than repair.
Worked examples
Every figure in the tables below is produced by this page’s own calculator at build time, so the numbers and the tool always agree. Select any row to load that scenario.
How does book value fall under each method?
The same asset at four points in its life.
| Year | Declining balance book value | Straight-line book value |
|---|---|---|
| Year 1 | $48,000.00 | $54,500.00 |
| Year 3 | $30,720.00 | $43,500.00 |
| Year 5 | $19,660.80 | $32,500.00 |
| Year 10 | $6,442.45 | $5,000.00 |
Questions
Which method should be used?
That depends on the accounting standards and tax rules that apply, and often on the asset class. Straight-line is simpler and common for reporting; accelerated methods are frequently allowed or required for tax. An accountant should confirm which applies to a given asset.
Does the method change the total depreciation?
No. Both write the asset from cost down to salvage value over its life. Only the timing differs, which affects reported profit and tax in individual years rather than in total.
Why does declining balance never quite reach zero?
Because each year takes a percentage of what remains, which mathematically never reaches zero. Practical implementations floor it at the salvage value, which is what this calculator does.
Is depreciation an actual cash outflow?
No. The cash went out when the asset was bought. Depreciation is the accounting recognition of that cost spread over time, which is why it is added back when working out cash flow.
For the cash flow view with depreciation added back, see the free cash flow calculator. For an earnings measure that excludes it entirely, see the EBITDA calculator.