In straight-line depreciation, the expense amount is the same every year over the useful life of the asset.ĭepreciation Formula for the Straight Line Method:ĭepreciation Expense = (Cost – Salvage value) / Useful life ExampleĬonsider a piece of equipment that costs $25,000 with an estimated useful life of 8 years and a $0 salvage value. Straight-line depreciation is a very common, and the simplest, method of calculating depreciation expense. The four main depreciation methods mentioned above are explained in detail below. In other words, it is the reduction in the value of an asset that occurs over time due to usage, wear and tear, or obsolescence. The most common depreciation methods include:ĭepreciation expense is used in accounting to allocate the cost of a tangible asset over its useful life. There are several types of depreciation expense and different formulas for determining the book value of an asset. Updated MaWhat are the Main Types of Depreciation Methods?
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