Straight-Line Depreciation

Also known as annual depreciation · equipment write-down

D = \frac{C - S}{n}

Units aren’t used in this calculation — every value is a plain number.

Worked example: $30,000 van, $5,000 salvage, 5 years → $5,000 a year — press Try an example to run it live, then adjust anything.

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Straight-Line Depreciation explained

An asset costs something new and is worth something at the end. Straight-line depreciation spreads the difference evenly across its useful life: $D = (C - S)/n$ . A $30,000 van expected to fetch $5,000 after five years is written down $5,000 a year. Its simplicity is the whole appeal, and it remains the most common method in financial statements worldwide.

The virtue and the flaw are the same thing. Real assets do not lose value evenly: a new van drops a fifth of its worth the moment it leaves the lot, then declines gently for years. Straight line ignores that curve entirely, so the book value sits above the market value early in life and below it later. It is an accounting convention, not a valuation.

Read backwards it answers a useful shop question. Given what a machine cost, what it will fetch, and what you can afford to write off annually, the formula returns the life you are implicitly assuming.

Straight-Line Depreciation formula

D = \frac{C - S}{n}

Where

$D$ = Depreciation per year ($)
$C$ = Initial cost ($)
$S$ = Salvage value ($)
$n$ = Useful life in years

Missing one of these? Work it out first, then come back

Depreciation per year — Simple Payback Period, Equivalent Annual Cost
Initial cost — Declining-Balance Depreciation (Book Value), Net Present Value of a Uniform Annual Cash Flow
Salvage value — Currency Exchange Conversion, Gross Pay from an Hourly Wage
Useful life in years — Net Present Value of a Uniform Annual Cash Flow, Equivalent Annual Cost

Part of this formula set

Equipment, depreciation and payback

4 formulasStraight-line and declining-balance depreciation plus simple payback — how a purchase looks on paper and in cash.