📉 Depreciation Calculator
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📌 Understanding Depreciation Calculation
Depreciation is calculated using the **straight-line method**, which spreads the cost of an asset evenly over its useful life:
- Annual Depreciation = (Initial Cost – Salvage Value) / Useful Life
- This method assumes equal depreciation expense over the asset’s lifespan.
📌 Example Calculations
| Initial Cost | Salvage Value | Useful Life (Years) | Annual Depreciation |
|---|---|---|---|
| 10000 | 2000 | 5 | 1600 |
| 50000 | 5000 | 10 | 4500 |
| 75000 | 10000 | 15 | 4333.33 |
🔧 Practical Applications of Depreciation Calculation
1. Business Accounting: Helps in financial reporting and tax deductions.
2. Asset Management: Determines asset value over time.
3. Investment Decisions: Evaluates asset replacement and resale value.
❓ FAQs
Q1: How do I calculate depreciation?
✅ Use the formula Annual Depreciation = (Initial Cost – Salvage Value) / Useful Life
Q2: What is the purpose of depreciation?
✅ It helps allocate the cost of an asset over its useful life.
Q3: What happens when an asset is fully depreciated?
✅ Its book value reaches the salvage value or zero.
Q4: Where is depreciation calculation commonly used?
✅ It is widely used in accounting, tax planning, and business investments.
Q5: Why is depreciation important?
✅ It helps in assessing asset value, reducing tax liability, and financial planning.