How do you calculate the asset depreciation?
submitted by radeza mangulabnan

(a)dam

There are several methods that can be used to calculate depreciation, depending on what type of asset you have. The most common method is "Straight-line" depreciation. The formula is: (Cost of Asset - Residual Value) / Life of Asset = Annual Asset Depreciation

MikenIke

To clarify the "Straight-line" formula, residual value is how much you can sell the asset for when you're done using it. It may be that you can't sell it, in which case the residual value is zero. It's possible that you'll have to pay someone to dispose of your old, broken asset, which makes your residual value a negative number.

cliborp

If an asset loses value faster at the beginning of its use, you need to use accelerated depreciation, such as the Declining Balance method. This is a more accurate representation of the usefulness of an asset over its lifetime, but it's more complicated to calculate.

lineus

Activity Deprecation also provides more accuracy, as it's based on the actual use of the asset, rather than estimated value. A car, for example, could be depreciated based on how many miles it drives each year.