Overview

CALCULATE DEPRECIATION OF AN ASSET USING 4 OF THE MOST POPULAR DEPRECIATION METHODS. Fully editable version available.

This excel tool will calculate the depreciation expense of an asset, based on the selected depreciation method, generating a depreciation schedule for the full term, also in chart form.

According to generally accepted accounting principles, several methods of depreciation can be used. Among the most common:

  • Straight-Line Depreciation
  • Declining (Double Declining) Balance Depreciation
  • Sum-of-the-Years’ Digits Depreciation
  • Units of Production Depreciation

STRAIGHT-LINE DEPRECIATION

The straight-line method calculates depreciation by subtracting from the original cost the estimated salvage value and dividing the difference by the number of years of estimated useful life of the asset.

DECLINING BALANCE DEPRECIATION

The declining balance method is a type of accelerated depreciation used to write off depreciation costs more quickly and minimize tax exposure. Some companies may also use the double-declining balance method, an even more aggressive depreciation methodology.

SUM-OF-THE-YEARS’ DIGITS DEPRECIATION

The sum-of-the-years' digits method offers a depreciation rate that accelerates more than the straight-line method, but less than the declining balance method. Annual depreciation is separated into fractions, using the number of years of the asset's useful life.

UNITS OF PRODUCTION DEPRECIATION

Units of production assign an equal expense rate to each unit produced, which makes it most useful for assembly or production lines. The formula involves using historical costs and estimated salvage values, and then determines the expense for the accounting period multiplied by the number of units produced or number of hours used.

 

(including quotes from: investopedia.com and corporatefinanceinstitute.com)

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