Calculate Straight-Line Depreciation
SLN calculator to determine uniform annual depreciation
SLN Calculator
SLN Calculation
Calculates the annual depreciation of an asset by distributing it equally over the useful life.
Example & Explanation
Example: SLN Calculation
SLN Concept
Definition:
SLN distributes depreciation uniformly over all years.
Use Case:
What is the annual depreciation of a fixed asset?
Formula:
SLN = (Cost - Salvage) / Life
What is Straight-Line Depreciation?
- SLN = Straight Line = Uniform depreciation
- Simplest depreciation method
- Equal cost each year
- Widely used in accounting
- Often accepted for tax purposes
|
|
Mathematical Foundation of SLN Calculation
The SLN function calculates uniform depreciation:
Depreciation Formula
Linear depreciation per period
Example Calculation
Annual depreciation: $2,499.75
Parameter Descriptions
Initial Cost
The original purchase price or acquisition cost of the asset.
Example: A truck costs $50,000 → Cost = 50,000
Salvage Value
The estimated residual value of the asset at the end of its useful life.
Example: The truck is worth $5,000 after 5 years → Salvage = 5,000
Useful Life
The planned or economic useful life of the asset in years.
Example: The truck will be used for 5 years → Life = 5
Depreciation Base
The depreciation base is the difference between the initial cost and salvage value. This base is distributed uniformly over the useful life.
Quick Reference
Standard Example
Formula Overview
\[SLN = \frac{Cost - Salvage}{Life}\]
Annual Depreciation
Common Scenarios
• Buildings (20-40 years)
• Vehicles (4-7 years)
• Machinery (5-10 years)
• Computers (3-5 years)
SLN Function - Detailed Explanation
Fundamentals
The SLN (Straight Line) method is the simplest and most widely used depreciation method. It distributes depreciation uniformly over all years.
The depreciable amount is distributed equally across all years.
Benefits of Straight-Line Depreciation
Practical Advantages
Simple: Easy to understand and calculate
Tax: Often accepted for tax purposes
Reliable: Predictable and consistent
Transparent: Accountants understand it well
Comparison with Other Methods
There are also accelerated depreciation methods (like DDB) that allow higher depreciation in early years.
• SLN: Uniform per year
• DDB: Higher initially, lower later
• SYD: Sum-of-years-digits method
Important Considerations
Important Points
- All values must be positive
- Salvage value should be realistically estimated
- Life significantly affects depreciation
- Changes can usually be made retroactively in most countries
Practical Depreciation Examples
Example 1: Truck
Purchase: $50,000
Salvage: $5,000
Useful Life: 5 Years
Annual Depreciation: $9,000
Example 2: Building
Purchase: $500,000
Salvage: $50,000
Useful Life: 50 Years
Annual Depreciation: $9,000
Example 3: Computer
Purchase: $4,000
Salvage: $400
Useful Life: 4 Years
Annual Depreciation: $900
Calculation Tips
- Realistic Values: Salvage should be achievable
- Check Life: Follow industry standards
- Consistency: All periods equal
- Tax: Consult with tax advisor
- Documentation: Create depreciation schedule
- Verification: Total = Cost - Salvage
Key Insights
Salvage Value is Critical
A higher salvage value reduces annual depreciation. A realistic estimate is important.
Useful Life Affects Everything
Longer useful life = lower annual depreciation. This has direct tax implications.
Reliable Planning
SLN enables simple financial planning since depreciation remains constant.
Tax Implications
Depreciation reduces taxable income. Higher depreciation = lower taxes.