Accounting Guide
Straight-line depreciation spreads an asset's depreciable cost evenly over its useful life.
Quick answer
Straight-line depreciation records the same depreciation expense each year.
It is commonly used to spread an asset's cost over the years the asset is expected to help the business.
It uses cost, salvage value, and useful life.
It is simple, but it may not fit every asset or accounting situation.
Formula
Annual Depreciation Expense = (Asset Cost - Salvage Value) / Useful Life
Depreciable Amount = Asset Cost - Salvage Value
Terms
Asset cost is the amount assigned to the asset.
Salvage value is the estimated value at the end of useful life.
Useful life is how many years the asset is expected to provide value.
Depreciable amount is the part of the asset cost that will be depreciated.
| Term | Meaning | Simple example |
|---|---|---|
| Asset Cost | Amount assigned to the asset | RM 10,000 |
| Salvage Value | Estimated value at the end of useful life | RM 1,000 |
| Useful Life | Years the asset is expected to provide value | 5 years |
| Depreciable Amount | Cost minus salvage value | RM 9,000 |
| Annual Depreciation Expense | Depreciable amount divided by useful life | RM 1,800 per year |
Steps
Worked example
A business buys equipment for RM 10,000. The estimated salvage value is RM 1,000. The useful life is 5 years.
| Item | Amount |
|---|---|
| Asset cost | RM 10,000 |
| Salvage value | RM 1,000 |
| Depreciable amount | RM 9,000 |
| Useful life | 5 years |
| Annual depreciation expense | RM 1,800 |
Depreciable amount is RM 10,000 - RM 1,000 = RM 9,000.
Annual depreciation expense is RM 9,000 / 5 = RM 1,800.
The business records RM 1,800 of depreciation expense each year using the straight-line method.
Schedule
| Year | Depreciation Expense | Accumulated Depreciation | Book Value |
|---|---|---|---|
| 1 | RM 1,800 | RM 1,800 | RM 8,200 |
| 2 | RM 1,800 | RM 3,600 | RM 6,400 |
| 3 | RM 1,800 | RM 5,400 | RM 4,600 |
| 4 | RM 1,800 | RM 7,200 | RM 2,800 |
| 5 | RM 1,800 | RM 9,000 | RM 1,000 |
Depreciation expense is the same each year.
Accumulated depreciation increases each year.
Book value decreases until it reaches the estimated salvage value.
Book value in this simple schedule is cost minus accumulated depreciation.
Comparison
Depreciation expense is the amount recorded for one period.
Accumulated depreciation is the total depreciation recorded so far.
Beginners often confuse the annual expense with the total accumulated amount.
| Term | Meaning | Example |
|---|---|---|
| Depreciation Expense | Depreciation recorded in one period | RM 1,800 in Year 1 |
| Accumulated Depreciation | Total depreciation recorded over time | RM 3,600 after Year 2 |
| Book Value | Asset cost minus accumulated depreciation | RM 6,400 after Year 2 |
Why it matters
Limitations
It is a simple method.
It assumes the asset provides value evenly over time.
It does not necessarily match actual market value.
It does not decide tax treatment.
It may not fit assets that lose value faster early in life.
It does not replace professional accounting or tax advice.
Use the tool
Users can enter asset cost, salvage value, and useful life. The tool calculates annual depreciation expense using the straight-line method.
It is useful for homework checks, beginner learning, and simple depreciation estimates.
You can calculate straight-line depreciation, review financial ratios, or review assets, liabilities, and equity.
Tools
Use it to estimate annual straight-line depreciation.
Use it to review assets, liabilities, and equity.
Use it to review basic ratios that may involve assets or profit.
Use it to check whether debit and credit lines balance.
To connect depreciation with performance measures and journal entries, read Financial Ratios for Beginners and Journal Entries for Beginners.
Common mistakes
Checklist
FAQ
Straight-line depreciation records the same depreciation expense each year over an asset's useful life.
Annual Depreciation Expense = (Asset Cost - Salvage Value) / Useful Life.
Subtract salvage value from asset cost to get depreciable amount, then divide by useful life.
Salvage value is the estimated value of an asset at the end of its useful life.
Useful life is the number of years an asset is expected to provide value to the business.
Depreciable amount is asset cost minus salvage value. It is the amount spread over useful life.
Depreciation expense is the amount recorded for one period. Accumulated depreciation is total depreciation recorded so far.
Not necessarily. Book value is an accounting amount, while market value depends on what the asset may sell for.
Yes. It can help check simple straight-line depreciation calculations, but you should still show your formula and working.
No. It is one common method. Other methods may be used depending on the asset, accounting rules, or tax requirements.
