Straight-line depreciation explained
Straight-line is the simplest and most common method: it spreads the loss in value evenly across the asset's useful life. You take the cost, subtract what you expect it to be worth at the end (the salvage value), and divide by the number of years. The result is the same depreciation expense every year until the book value reaches the salvage value.
Other methods
Some assets lose value faster early on. Declining-balance and double-declining-balance methods front-load the depreciation to reflect that — see the Excel functions above.
Frequently asked questions
What is salvage value?
It's the estimated worth of the asset at the end of its useful life — what you could sell it for as scrap or second-hand. Depreciation only applies to the amount above salvage.
Why does the last year's book value equal the salvage value?
Because straight-line depreciation is designed to write the asset down exactly to its salvage value over its useful life — no more, no less.
Can salvage value be zero?
Yes. If you expect the asset to be worthless at the end, enter 0 and the full cost is depreciated.