1. What Is Straight-Line Depreciation?

Straight-line depreciation is the simplest and most commonly used method of allocating the cost of a capital asset over its useful life. It assumes the asset will lose the same amount of value each year over its 5-year lifespan.

2. How Does The Calculator Work?

The calculator uses the straight-line depreciation formula:

Where:

• Cost — Original purchase price of the asset
• Salvage Value — Estimated resale value at end of 5 years
• 5 — The useful life of the asset in years

Explanation: This method evenly spreads the cost of the asset (minus its salvage value) over its 5-year useful life.

3. Importance Of Depreciation Calculation

Details: Accurate depreciation calculation is essential for proper financial reporting, tax calculations, and business planning. It helps businesses allocate the cost of assets appropriately over time.

4. Using The Calculator

Tips: Enter the original cost of the asset and its estimated salvage value after 5 years. The calculator will compute the annual depreciation amount and provide a full 5-year depreciation schedule.

5. Frequently Asked Questions (FAQ)

Q1: What types of assets use 5-year depreciation?
A: Many types of equipment, computers, vehicles, and office furniture are commonly depreciated over 5 years according to tax guidelines.

Q2: Can salvage value be zero?
A: Yes, if the asset is expected to have no resale value at the end of its useful life, the salvage value can be set to zero.

Q3: How does this differ from other depreciation methods?
A: Unlike accelerated methods (like double-declining balance), straight-line depreciation allocates the same expense amount each year.

Q4: Is this method accepted for tax purposes?
A: Yes, straight-line depreciation is an accepted method for both financial reporting and tax purposes, though specific rules may vary by jurisdiction.

Q5: What if my asset has a different useful life?
A: This calculator is specifically designed for 5-year depreciation. For different timeframes, the formula would need to be adjusted accordingly.