straight-line depreciation
Quick Summary
Straight-line depreciation is an accounting method used to calculate the periodic depreciation of a depreciable asset. This method involves subtracting the asset's scrap value from its original cost and then dividing the result by the number of periods in its anticipated useful life.1
This approach recognizes the same amount of depreciation expense each year, assuming the asset's value diminishes evenly over time. It is one of several depreciation formulas accountants use, with others, like declining-charge depreciation, recognizing more depreciation in the asset's earlier years. The goal is to allocate the cost of an asset over the period it is expected to be used to generate revenue.2
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- depreciation
Straight-line, fixed-percentage, and, more rarely, annuity methods of depreciation (giving, respectively, constant, gradually decreasing, and gradually increasing charges) are standard. Sometimes charges vary with use (e.g., with the number of miles per year a truck is driven). Special rules allow depletion of nonreproducible capital (such…
Read MoreStraight-line, fixed-percentage, and, more rarely, annuity methods of depreciation (giving, respectively, constant, gradually decreasing, and gradually increasing charges) are standard. Sometimes charges vary with use (e.g., with the number of miles per year a truck is driven). Special rules allow depletion of nonreproducible capital (such…
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accountingDepreciationTwo popular formulas are straight-line depreciation, in which the same amount of depreciation is recognized each year, and declining-charge depreciation, in which more depreciation is recognized during the early years of life than during the later years, on the assumption that the value of the asset’s service declines as…
Read MoreTwo popular formulas are straight-line depreciation, in which the same amount of depreciation is recognized each year, and declining-charge depreciation, in which more depreciation is recognized during the early years of life than during the later years, on the assumption that the value of the asset’s service declines as…
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