Straight-Line Depreciation
Equal yearly fall in the value of an asset.
\text{Depreciation} = \dfrac{\text{Cost} - \text{Salvage Value}}{\text{Useful Life}}
1What it means
The straight-line method spreads an asset’s loss in value evenly across its useful life, giving the same depreciation amount every year.
2Variables
| Symbol | Meaning |
|---|---|
| \text{Cost} | Purchase price of the asset |
| \text{Salvage Value} | Expected resale value at the end |
| \text{Useful Life} | Years the asset is used |
3Worked examples
Example 1 Worked solution
Q. A machine costs ₹50,000, has ₹5,000 salvage value and a 9-year life. Find annual depreciation.
- Depreciation = (Cost − Salvage) / Life.
- = (50,000 − 5,000) / 9.
- = 45,000 / 9.
✓ ₹5,000 per year
4Where it's used
- ✦Preparing profit & loss accounts.
- ✦Estimating the book value of equipment over time.
5Tips & common mistakes
- !Salvage (scrap) value is subtracted before dividing.
- !Book value after t years = Cost − t × annual depreciation.