Depreciation Calculator: Most Common Methods

This is an online simulator that generates depreciation schedules for fixed assets using the most common methods worldwide: Straight-line, US declining balance, French declining balance, Spanish declining balance, SOFTY, declining balance, and units of production. This free professional calculator takes into account the residual value and acquisition during the accounting year. It can be used by students and professionals who do not have accounting software or have limited software. This calculator is configurable.

Accounting Depreciation Calculator

What is Accounting Depreciation?

Before discussing depreciation, it's important to understand how to calculate the net income for a period or a year.

Net income = Revenue for the period - Total expenses for the period

Expenses represent all the company's costs such as materials consumed, salaries paid, taxes, and services.

However, it's observed that the company uses equipment during the period. The value of this equipment decreases gradually until it reaches zero after a few years. Therefore, this loss of value must be considered as an expense.

Depreciation is the recognition of the decrease in the value of equipment in accounting. It's a matter of considering this loss as an expense. And since equipment will be used for several years (or periods), a portion of the acquisition cost of this equipment must be taken as an expense. The determination of this portion depends on the depreciation method chosen (Straight-line, declining balance, increasing, SOFTY...). The choice of a method depends on several factors such as the country's tax laws and the company's objectives.

What are the Roles of Depreciation?

Accounting and Tax Roles of Depreciation

From an accounting standpoint, depreciation increases a company's expenses, which reduces net income for the period. Indeed, the loss of value suffered by equipment is recorded in accounting. It allows the cost of a fixed asset to be spread over several years. This allocation aims to reflect the actual consumption of the asset.

At the same time, it allows balance sheet items to be presented at their "real" or nearly real value. Indeed, the balance sheet must reflect the reality of the company's assets. So, on a balance sheet, you should find the net book value of the fixed asset. If a truck was acquired at the beginning of 2025 for 50,000 dollars, it will lose 10,000 dollars of its value per year. After two years, it will appear on the balance sheet with an amount of only 30,000 dollars.

From a tax perspective, depreciation is an expense that reduces income and therefore reduces taxes payable. This is why tax depreciation rules differ from country to country. Generally, most companies prefer tax rules to accounting rules to benefit from the tax reduction. On this page, I will present the most well-known depreciation methods worldwide. But there are so many tax laws that I cannot present them all.

Economic Role of Depreciation

Recognizing depreciation as an expense in accounting, even though there is no cash outflow, allows the company to save some money to finance the replacement of this equipment at the end of its useful life. Indeed, through depreciation, net income is artificially reduced. It is said that depreciation is a non-cash expense or a calculated but not paid expense.

Basic Concepts

To calculate accounting depreciation or to present a depreciation schedule, certain concepts must be understood.

Acquisition Cost of Fixed Assets

In accounting, an asset is recorded at its cost (excluding recoverable taxes). There are two different concepts here:
- Purchase price: the amount paid to the seller (supplier).
- Acquisition cost: the amount paid to the seller + the costs associated with this purchase.

Example: In USA, you buy a PC imported from China. You pay a price of 400 dollars to the Chinese supplier "YANG". You pay shipping costs of 30 dollars and USA customs duties of 170 dollars. The cost will be 600 dollars.

Useful Life of the Asset

This is the number of years (2 years, 4.5 years, 20 years) that the company estimates it will use the asset in good condition. It is a forecast. Generally, this number varies from one country to another and depends on the nature of the asset. Indeed, tax laws vary around the world.

Here are some examples: A PC generally has a useful life of between 2 and 3 years. A truck has a useful life of between 4 and 7 years. A building (the construction, not the land) has a useful life of more than 20 years.

One last remark: For a PC with a useful life of 2 years, the company can use it for 6 months and then sell it, or it can use it for 5 years.

Residual Value

Generally, it is possible to sell a used asset after the end of its useful life. In this case, we say that there is a residual value. So the residual value is the net selling price of the asset at the end of its useful life. It is a forecast value determined on the day of acquisition. Generally, the residual value is considered to be zero.

Example 1: At the beginning of 2025, you buy a car for 20,000 dollars. Useful life: 5 years. You estimate that you can sell this car in 2030 for 3,000 dollars net. So the residual value is 3,000 dollars.

Note 1: If you estimate that you can sell the car for a price of 3,000 dollars but the sale operation generates costs of 400 dollars, then the residual value is 2,600 dollars.

Note 2: How to determine the selling price in 2030? There are techniques to do this... personally I don't know them.

Note 3: There is a very rare case where the residual value is negative. Indeed, to get rid of old equipment, you spend money...

Example 2: At the beginning of 2025, you buy a printer for 200 dollars. Useful life: 3 years. You estimate that you will throw this printer out the window in 2028. So the residual value is 0 dollars.

Depreciable Amount or Depreciation Base

If we consider that an asset costing 10,000 dollars will have a residual value of 2,000 dollars after 5 years. So the loss of value in 5 years will be 8,000 dollars. This amount of 8,000 is the depreciable amount. It is the amount that will be spread over the 5 years. We can simply say that the loss of value will be 8,000/5 = 1,600 per year.

Depreciable amount = Acquisition cost - Residual value

Since the residual value is generally zero, the depreciable amount is generally equal to the acquisition cost.

Depreciation Rate

This rate depends on the useful life. If the useful life is 4 years, then we can say that the asset will lose 25% of its value each year. The formula for the rate is

Depreciation rate = 1/useful life

Example 1: Useful life 5 years, so rate = 1/5 = 0.2 or 20%.

Example 2: Useful life 6 years and 3 months, so rate = 1/6.25 = 0.16 or 16%.

Net Book Value

Each year, and through use, the value of the asset decreases. We can calculate the new value of this asset at the end of each year (or even at any time). The formula for the net book value is:

Net book value = Acquisition cost - accumulated depreciation

Example 1: Suppose an asset acquired at the beginning of 2025 for 3,600 dollars. Its estimated useful life is 3 years. So the annual depreciation will be 3,600/3 = 1,200. This is the annual depreciation.
The first year the depreciation = 1,200. So its NBV at the end of 2025 will be 3,600 - 1,200 = 2,400 dollars.
The second year the depreciation = 1,200. So its NBV at the end of 2026 will be 3,600 - (1,200+1,200) = 1,200 dollars.
The third year the depreciation = 1,200. So its NBV at the end of 2027 will be 3,600 - (1,200+1,200+1,200) = 0 dollars.

Note 1: The NBV is a calculated value and not a real value. Indeed, on the market in 2027, the asset can be sold for 700 dollars while in accounting it is worth 0.

Note 2: The NBV is a value calculated at a specific date. So there are as many NBVs as there are dates. We have calculated 3 NBVs above and we can calculate others. For example, the NBV on 1-2-2025. We are looking here for the value of the asset, one month after acquisition. The answer will be simple: if the asset loses 1,200 dollars of its value in one year, then it will lose only 100 dollars per month. So the NBV will be 3,600 - 100 = 3,500 dollars.

Prorata temporis

If we purchase equipment on 1/1/2025 for 3600 dollars, and its useful life is 3 years, then it is simple to say that the depreciation for 2025 is 3600/3 = 1200.

If we purchase the same equipment on 12/1/2025 ,then it is obvious that the depreciation will not be 1200 because 1200 is the depreciation for a full year and not just one month. In this case we must consider the actual period of use which is only one month. And the depreciation will be 1200/12 = 100 only. This is the principle of prorata temporis: we must consider the actual duration of use and the depreciation will be proportional to this duration

If you purchase the same equipment on 11/10/2025, then a problem arises. Do we count 2 months, 1 month, or do we count the number of days? And how do we do it? Again, each country and each company has its own rules.

Some use the month: in this case, if the equipment is acquired before the 15th, then the month in question is counted. For example, if the date is 11/10/2025, we count 2 months, and if the date is 11/20/2025, we count 1 month. In the calculator above I use the month.

Some use the half-month: in this case, the year counts 24 half-months. If the equipment is acquired before the 8th (or the 23rd), then the half-month in question is counted. For example, if the date is 11/10/2025, we count 3 half-months, and if the date is 11/7/2025, we count 4 half-months. The depreciation for half a month is calculated as follows: 1200/24 = 50. Then we multiply by the number of half-months

Some use the day: in this case, the year counts 360 days (or 365).  For example, if the date is 11/10/2025, we count 20 days in November and 31 in December to find 51 days. The depreciation for one day is calculated as follows: 1200/360 = 33.33. Then we multiply by the number of days: 33.33*51 = 170 euro

Some use the quarter, the half-quarter, the semester and there are those who use the year.

Depreciation Methods

There are several accounting depreciation methods that vary from one country to another and from one company to another. In all cases, it is a question of answering the question: How to spread this expense over several years.     generally there are 5 main ways to calculate depreciation:

Linear Depreciation

The amount of annual depreciation is almost equal for all years. This is the most well-known and widespread method. Generally, it is applied in the same way worldwide. You will find a more detailed explanation with examples below.

Declining Balance Depreciation

The amount of depreciation in the first year  is high and then decreases in subsequent years. You will find a more detailed explanation with examples below, focusing on the Spanish declining balance method and the SOFTY method

Mixed Declining Balance Depreciation

c'est un mélange entre l'amortissement dégressif et linaire.Le montant de l'amortissement annuel est élevé au cours des premières années puis diminue puis il devient linéaire à la fin des dernières années.Vous trouvez ci-bas une explication plus détaillée avec des exemples sur l'amortissement dégressif américain, l'amortissement dégressif français et l'amortissement dégressif espagnol mixte. Pour ces trois mode, le principe global est le même mais, il y a des petites différence surtout à la détermination du montant annuel des amortissement des dernières années.

Increasing Depreciation

The amount of annual depreciation is high in the first years and then decreases in the last years. You will find a more detailed explanation with examples below.

Variable Depreciation

The amount of annual depreciation for each year depends on the degree of use of the equipment. You will find a more detailed explanation with examples below.

Example of Application and Countries

In what follows I will explain each method and give a numerical example based on equipment acquired for 4800 dollars and depreciated over 4 years.(rate: 25 %) and whose residual value is zero. Using the same data, we can distinguish the differences between these methods. It should also be understood that a French depreciation method is applied in France but also in other countries. The US method is also applied in many countries.

Straight-Line Depreciation: Explanation and Examples

This is the most widely used method. It involves spreading the cost evenly over time. This method applies the principle of prorata temporis.

Example 1 : The asset is acquired on 1-1-2025. The annual depreciation will be 4800/4 or 4800*0.25 = 1200. So in 2025: 1200; in 2026: 1200; in 2027: 1200; and in 2028: 1200.

It's clear that for each year, we apply the 25% rate again to the asset's cost to find the depreciation: 4800*0.25 = 1200.

Example 2 : The asset is acquired on 1-3-2025. The annual depreciation will be 1200. However, since the asset is acquired during the year, the depreciation for the first year will only be (1200/12) *10 = 1000, and the depreciation for the last year will be 100*2 = 200.

US Declining Balance Depreciation: Explanation and Examples

Used in the US and UK, this is a hybrid system (declining balance initially, then straight-line). It involves spreading the cost over time in an unequal manner, with higher depreciation in the initial years and decreasing amounts in subsequent years. This method applies the principle of prorata temporis. The procedure is as follows: A new, higher depreciation rate is calculated.

Declining balance rate = straight-line rate * coefficient

Example: Declining balance rate = 0.25 * 2 = 50%

The coefficient used depends on the nature of the asset, its useful life, and the country's legislation. These coefficients are generally between 1.25 and 3, in increments of 0.25.

This rate is always applied to the remaining book value (remaining depreciation base) and not to the original cost.

However, a switch to a straight-line rate must be made when the straight-line rate becomes higher than the declining balance rate. This straight-line rate is recalculated each year and its formula is:

Straight-line rate = 1 / remaining useful life in years

or straight-line rate = 12 / remaining useful life in months

Example  : An asset costing 4800 is acquired on 1-3-2025. Useful life: 4 years. Straight-line rate: 25%. Declining balance rate coefficient: 2. Therefore, declining balance rate: 2*0.25 =50%.

Since the asset is acquired during the year, the depreciation will be for 10 months only, i.e., 4800*0.5*10/12=2000. Thus, the depreciable value becomes 4800 -2000 = 2800. The second-year depreciation is 2800*0.5 = 1400. For the remaining years, the straight-line rate will be calculated and compared to the declining balance rate. If the straight-line rate is higher, it will be used.

In 2028, the straight-line rate becomes higher than the declining balance rate, so the straight-line method is used. For the last year, we can apply the final straight-line rate of 100% or simply settle the calculations.

Instead of comparing rates, we can also compare the annual depreciation under the declining balance method with the straight-line method and switch to straight-line when it becomes higher.

US Double Declining Balance Depreciation: Explanation and Examples

This is a special case of the US declining balance depreciation mentioned above. It is called "double" because the declining balance rate coefficient (acceleration coefficient) is equal to 2 (or 200%).

French Declining Balance Depreciation (Mixed): Explanation and Examples

This is a mixed system (declining balance at the beginning + straight-line at the end). It follows the same rules as the US declining balance method except for the calculation of the annual straight-line rate. Indeed, the US system takes into account the remaining useful life in years and fractions of a year (2.3 years or 1.75 years) while the French system rounds down the remaining years to the nearest whole number (2 years, 3 years...).

Therefore, a switch to another straight-line rate is necessary when the straight-line rate becomes higher than the declining balance rate. This recalculated straight-line rate is determined each year using the following formula:

Straight-line rate = 1/remaining useful life in whole years

Example : An asset costing 4800 is acquired on 1-3-2025. Useful life: 4 years. Straight-line rate: 25%. Declining balance rate coefficient: 2. Therefore, declining balance rate: 20.25 =50 %.

Since the asset is acquired during the year, depreciation will be for 10 months only, i.e., 48000.510/12=2000. Thus, the depreciable value becomes 4800 -2000 = 2800. For the second year, depreciation is 28000.5 = 1400. For subsequent years, the straight-line rate will be calculated and compared to the declining balance rate. If the straight-line rate is higher, it will be used.

The depreciation schedule is as follows:

Spanish Declining Balance Depreciation: Explanation and Examples

This involves spreading the cost over time in an unequal manner across years. The depreciation amount in the first year is high and then decreases over the years. This method applies the principle of prorata temporis. The procedure is as follows: A new, higher depreciation rate is calculated. The formula for calculating the declining balance rate is:

Declining balance rate = straight-line rate * coefficient

The coefficient used depends on the nature of the asset, its useful life, and the country's legislation. These coefficients are generally between 1.25 and 3, in increments of 0.25.

Example: Declining balance rate = 0.25 * 1.5 = 37.5%

This rate is always applied to the remaining book value (remaining depreciation base) and not to the original cost.

However, when the last year is reached, the depreciation will be equal to the remaining book value to be depreciated. This is why it is an easy system to apply.

Example  : Equipment costing 4800 is acquired on 1-3-2025. Useful life: 4 years. Straight-line rate: 25%. Declining balance rate coefficient: 1.5. Therefore, declining balance rate: 1.5*0.25 =37.5%. Therefore, the end of the depreciation is 1/3/2029 (2029 is the last year)

The depreciation for the first year is equal to the depreciation for 10 months, i.e., 4800*0.375*10/12 = 1500. Then this rate is applied to subsequent years except for the last year. In the last year, depreciation = remaining book value.

Mixed Spanish Declining Balance Depreciation: Explanation and Examples

It is similar to the Spanish declining balance depreciation except for the final years. Indeed, for each year, the declining balance depreciation is compared to the constant annuity calculated on the initial depreciable value (and not on the remaining balance). If the constant annuity is higher than the declining balance depreciation, we use:
- The amount of the constant annuity or
- The remaining book value (if it is lower)

Example    : Equipment costing 4800 is acquired on 1-3-2025. Useful life: 4 years. Straight-line rate: 25%. Declining balance rate coefficient: 1.5. Therefore, declining balance rate: 1.5*0.25 =37.5%. Therefore, the end of the depreciation is 1/3/2029 (2029 is the last year)

The depreciation for the first year is equal to the depreciation for 10 months, i.e., 4800*0.375*10/12 = 1500. Then this rate is applied to subsequent years. The constant annual depreciation is 4800*0.25 = 1200.

The declining balance depreciation for the third year is equal to 2062.5*0.375 = 773.44. This amount is less than 1200 so we use 1200 until the end of the table. For the last year, the depreciation is equal to the remaining book value.

SOFTY Depreciation: Explanation and Examples

This method involves spreading the cost over time in an unequal manner across years, with higher depreciation in the initial years and decreasing amounts in subsequent years. This method can only be applied when the asset's useful life is a whole number of years. It follows the principle of prorata temporis.

The procedure is as follows:

Step 1: Calculate the total of the years. For example, for an asset with a useful life of 4 years, the total is 4+3+2+1 = 10.

Step 2:

Annual depreciation = asset cost * remaining useful life / total years

Example: Depreciation for the first year = cost * 4/10

Example 1 : Continuing with the same example of a 4800 asset with a useful life of 4 years and acquired on 1-1-2025. The schedule will be as follows:

Example 2 : Let's take the same previous example, but assume the asset was acquired on 1-3-2025. This method applies the principle of prorata temporis. So the depreciation for the first year will be 1920*10/12 = 1600 or (4800*4/10)*10/12. So the rate 4/10 or 40% has been applied for a period of 10 months only.

The second year is a bit more complicated: indeed, in the first year, we applied 4/10 for 10 months only. We need to complete the 2 months with a rate of 4/10 (40%) and apply the second rate (3/10 or 30%) for the following 10 months. So for the second year and subsequent years, we will apply two rates per year.

Depreciation year 2 = [(4800*4/10)*2/12] + [(4800*3/10)*10/12] = 320+1200=1520

Depreciation year 2 = 160*2+ 120*10 = 1520 with 160 and 120 being the monthly depreciation with each of the rates.

The complete table is as follows:

Progressive or Increasing Depreciation: Explanation and Examples

This is the exact opposite of the SOFTY method. Depreciation is spread over time in an unequal manner, with the depreciation expense being lower in the initial years and increasing in subsequent years. This method can only be applied when the asset's useful life is a whole number of years. It follows the principle of prorata temporis.

The procedure is as follows:

Step 1: Calculate the total of the years. For example, for an asset with a useful life of 4 years, the total is 4+3+2+1 = 10.

Step 2:

Annual depreciation = asset cost * rank of the year / total years

Example: Depreciation for the first year = cost * 1/10

Example 1 : Continuing with the same example of a 4800 asset with a useful life of 4 years and acquired on 1-1-2025. The schedule will be as follows:

Units of Production or Variable Depreciation: Explanation and Examples

This method involves allocating the asset's cost proportionally to a chosen unit of measure. This unit could be kilometers for a vehicle, units produced for a machine, or hours of use for equipment.

Example  : Consider a machine worth 4800 dollars. It is estimated to produce 10000 units over its lifetime. The depreciation for the first year would be (4800/10000)*2500 = 1200.