Straight Line Depreciation Calculator Template in Excel, OpenOffice Calc & Google Sheet to uniformly depreciate ing a tangible asset over the life span or until scrap value.
Additionally, this template calculates the applicable depreciation percentage for the given life span. It also provides the Depreciation Schedule for the life span of the asset.
Table of Contents
What is Straight Line Depreciation?
Under the Straight-line depreciation method, a tangible asset depreciates uniformly over its life span or until its predefined salvage value. Salvage value is the estimated value of a particular asset at the end of the life span.
In simple terms, it calculates the amount of decrease in value of an asset over time.
Moreover, the rate of depreciation is constant under the straight-line method. This means that the asset depreciates by the same amount each year until the life span.
Generally, businesses use the straight-line method as it involves easy calculations and has fewer chances of errors.
In the books of accounts, the value of the asset at the end of the life span will either be 0 or equal to its scrap value.
While laced on the graph, the straight-line depreciation will form a straight line. Hence, it is referred to as the straight-line or fixed percentage method.
Formula To Calculate Straight Line Depreciation
There are two formulas to calculate straight-line depreciation.
Formula 1
To calculate straight-line depreciation, subtract the salvage value of the asset from the cost of the asset and divide it by the life span of the asset in years.
Straight-Line Depreciation = (Cost of the Asset – Salvage Value) / Life Span
Where:
Cost Value = Purchase price of the asset + additional initial cost incurred to acquire the asset.
Salvage Value = Estimated value of the asset at the end of the life span.
Life Span = Estimated years an asset remains in usable condition
Formula 2
Another way to calculate depreciation is by subtracting the salvage value from the cost of the asset and then multiplying it by the depreciation rate.
Straight-Line Depreciation = (Cost of the Asset – Salvage Value) X Depreciation Rate
Where:
Cost Value = Purchase price of the asset + additional initial cost incurred to acquire the asset.
Salvage Value = Estimated value of the asset at the end of the life span.
Depreciation Rate = 100% / Estimated years an asset remains in usable condition.
Formula To Calculate Percentage of Straight Line Depreciation
Once you have calculated the straight-line depreciation amount by using the above formula, you can calculate the applicable depreciation percentage.
To calculate the percentage of Straight-Line Deprecation, divide the depreciation amount per year by the depreciable value of the asset.
Straight-Line Depreciation Percentage = Depreciation Amount Per Year / Depreciable Value X 100
Where:
Depreciation Amount = (Cost of the Asset – Salvage Value) / Life Span.
Depreciable Value = Cost of the Asset – Salvage Value.
What is Partial Straight Line Depreciation?
Partial Straight-Line Depreciation means calculating proportionate depreciation on the asset depending date of purchase of the asset during the year.
Generally, assets are bought around the year and not always bought or sold at the beginning of the accounting year. Hence, we need to partially depreciate the asset for that particular year.
Use the formula given below to calculate partial depreciation.
Formula To Find Partial Straight Line Depreciation
Partial Depreciation = (Annual Depreciation/ 12) X No of months
Where:
Annual Depreciation/12 gives you monthly depreciation of the asset and then multipliy it with no of months.
Download Straight Line Depreciation Calculator (Excel, OpenOffice Calc & Google Sheet)
We have created a simple and easy Straight-Line Depreciation Calculator with predefined formulas and functions.
Just insert a few details of the asset and it automatically calculates annual depreciation, depreciation percentage. It also prepares the depreciation schedule for the estimated life span of the asset.
Download your desired format and start using it.
Additionally, you can download other accounting templates like Accounts Payable Template, and Accounts Receivable Template, Profit and Loss Statement Template, Balance Sheet Template, etc.
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How to Use Straight Line Depreciation Calculator?
Straight-Line Depreciation Calculator consists of 2 sections: Data Input section and Depreciation schedule. Let us understand each section in detail.
Data Input Section
The data input section consists of the following heads:
Value of Asset
Additional Costs Of Set-up
Total Value
Life Span in Years (Estimated)
Estimated Scrap Value
Actual Scrap Value
Difference
Yearly Depreciation
Total Depreciation
Book Value at the end of Life Span
Depreciation Percentage
Insert the value of the asset as well as the additional set-up costs. This will calculate the total value of an asset for you. Insert life span and estimated scrap/salvage value.
Life span is the number of years an asset is expected to work. Scrap value is the price at which the asset is expected to be written off.
At the end of the life span when the business sells the asset, that price is the actual scrap price of the asset. It can either be higher or lower than the estimated value. Thus, if the difference is 0 then the asset was sold for the estimated salvage price.
Suppose, it is sold for a value higher than the estimated scrap value then the business makes a profit. On the contrary., if the asset is sold for a price less than the estimated scrap price then it is a loss.
This is depreciation profit/loss, not actual profit/loss. It is the gain/loss against the estimated value of the asset. If it is profit, the last line will turn green and display the word “Profit”, “Loss” if it is a loss, and 0 if it is NIL.
Furthermore, it calculates Yearly depreciation using the SLN function and applying the following formula:
=IF(D9=””,””,SLN(D9,D11,D10))
Book value at the end of the year is either or as per the estimated scrap value. Moreover, it calculates the depreciation percentage using the following formula: =IFERROR(H7/H8, ” ” ).
Straight Line Depreciation Schedule
This section is auto-populated based on the data inserted in the above section. It displays the following:
Year
Depreciation
Book Value
The depreciation for each year is calculated using the SLN function in combination with logical arguments. The formula used here is:
=IF(D16=””,””,IF(D16=$D$11,””,SLN($D$9,$D$11,$D$10)))
Book value is the value of the asset at the end of the year after deducting depreciation. The formula used here is:
=IFERROR(D16-C16,””)
Straight Line Method Conventions
Source: BlackBaud.com
Journal Entries For Straight Line Method
There are different entries at different stages.
Journal Entry at Purchase of Asset
Asset Account – Debit
Cash, Bank, or Creditor Account – Credit
Journal Entry at Depreciation
Depreciation Account – Debit
Asset Account – Credit
Journal Entry at the end of the year
P&L Account – Debit
Depreciation Account – Credit
At the end of the accounting period, the Balance sheet reflects the Book Value of the asset which is decreased by the amount of depreciation every year.
Advantages of Straight Line Method
- The calculations for this method are very easy and simple.
- As this method uses a constant rate to depreciate the asset, depreciation of an asset is equally spread over the total life span.
- Moreover, this method is used to completely written off the asset.
- Easy to calculate the total amount of depreciation just by multiplying the yearly depreciation by the life span.
Disadvantages of Straight Line Method
- Usually, wear and tear are more in later years. But the depreciation charged is constant and hence it increases pressure in later years on the asset.
- The asset loses efficiency in later years. This method doesn’t consider the loss of inefficiency of the asset in later years.
- Furthermore, it is not acceptable for tax purposes for many assets.
- As there is no provision of replacement of the asset under this method, creates an unnecessary financial burden on the finances of the company to buy a new asset.
- Moreover, it is not suitable for assets where additions and expansions can be made such as land, plant, and machinery, or buildings.
Frequently Asked Questions
What is MACRS?
ACRS, that is, the Accelerated Cost Recovery System was a method under the Tax Reform Act of 1986. Late on changed to Modified Accelerated Cost Recovery System (MACRS). It is a depreciation system used for tax purposes in the U.S. Under the guidance of the IRS, depreciation is calculated on assets. The IRS defines the eligibity of assets for MACRS and the useful life to calculate the depreciation. For taxation purposes, MACRS deprecation is more beneficial.
What are the types of MACRS system of calculation?
There are two deprecation systems under MACRS: General Depreciation System (GDS) and Alternative Depreciation System (ADS). They both have different recovery periods as well as depreciation methods. Usually, GDS is used. But in special cases, ADS can be used.
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