liminfoDepreciation
Free web tool: Depreciation
Depreciable Amount
9,000,000
Straight-Line Annual
1,800,000
Declining Balance Rate
36.90%
Annual Depreciation
| Year | Straight-Line | Declining Balance | Sum-of-Years |
|---|---|---|---|
| Year 1 | 1,800,000 | 3,690,427 | 3,000,000 |
| Year 2 | 1,800,000 | 2,328,502 | 2,400,000 |
| Year 3 | 1,800,000 | 1,469,185 | 1,800,000 |
| Year 4 | 1,800,000 | 926,993 | 1,200,000 |
| Year 5 | 1,800,000 | 584,893 | 600,000 |
| Total | 9,000,000 | 9,000,000 | 9,000,000 |
Accumulated Depreciation
| Year | SL Accumulated | DB Accumulated | SYD Accumulated |
|---|---|---|---|
| Year 1 | 1,800,000 | 3,690,427 | 3,000,000 |
| Year 2 | 3,600,000 | 6,018,929 | 5,400,000 |
| Year 3 | 5,400,000 | 7,488,114 | 7,200,000 |
| Year 4 | 7,200,000 | 8,415,107 | 8,400,000 |
| Year 5 | 9,000,000 | 9,000,000 | 9,000,000 |
About Depreciation
The Depreciation Calculator is a free, browser-based accounting and finance tool that computes annual depreciation expenses under three standard methods simultaneously: straight-line (SL), declining balance (DB), and sum-of-years-digits (SYD). Enter the acquisition cost, salvage value, and useful life of an asset to instantly generate a complete year-by-year depreciation schedule for all three methods side by side.
The straight-line method spreads the depreciable amount evenly over the asset's useful life: SL per year = (Cost - Salvage) / Life. The declining balance method applies a constant percentage rate to the diminishing book value: DB rate = 1 - (Salvage / Cost)^(1/Life). This rate is derived to ensure the book value exactly reaches the salvage value at the end of the useful life. The sum-of-years-digits method is an accelerated method that allocates a decreasing fraction of the depreciable base each year, using the formula: SYD(year) = (Remaining life / Sum of years digits) * Depreciable base.
The tool generates two tables: an annual depreciation table showing the three methods' expense for each year, and an accumulated depreciation table showing the cumulative totals. It also displays three summary metrics: the total depreciable amount (cost minus salvage), the annual straight-line charge, and the declining balance rate. This makes it easy to compare the front-loading of DB and SYD methods against the uniform SL method for accounting or tax planning purposes.
Key Features
- Straight-line (SL) depreciation: equal annual expense over the useful life
- Declining balance (DB) depreciation: constant rate applied to remaining book value
- Sum-of-years-digits (SYD) depreciation: accelerated front-loaded method
- DB rate auto-calculated: 1 - (salvage/cost)^(1/life) to hit exact salvage value
- Annual depreciation table: side-by-side comparison of all three methods per year
- Accumulated depreciation table: cumulative totals for all three methods per year
- Summary metrics: depreciable amount, SL annual charge, DB rate percentage
- Supports asset lives from 1 year up to 50 years
Frequently Asked Questions
What is depreciation and why is it calculated?
Depreciation is the systematic allocation of an asset's cost over its useful life, recognizing that assets lose value as they are used. It is recorded as an expense on the income statement, reducing taxable income. Different depreciation methods result in different expense patterns and book values, affecting both financial reporting and tax strategy.
What is the straight-line depreciation method?
The straight-line method allocates an equal amount of depreciation each year: Annual depreciation = (Cost - Salvage value) / Useful life. For example, an asset costing 10,000,000 with a 1,000,000 salvage value and a 5-year life depreciates by 1,800,000 per year. It is the simplest method and commonly used for buildings and furniture.
What is the declining balance method and how is the rate calculated?
The declining balance method applies a fixed rate to the asset's declining book value each year. The rate used in this calculator is the exact geometric rate that reduces the book value from the acquisition cost to the salvage value over the useful life: rate = 1 - (salvage / cost)^(1/life). This is also called the "full declining balance" or "precise DB" method, as opposed to the double-declining balance (DDB) method which uses 2/life as the rate.
What is the sum-of-years-digits (SYD) method?
The SYD method allocates a decreasing fraction of the depreciable base each year. For a 5-year asset, the sum of digits is 5+4+3+2+1=15. In year 1, depreciation = 5/15 of the depreciable amount. In year 2, it is 4/15, and so on down to 1/15 in the final year. Like DB, it is an accelerated method that recognizes more depreciation early in the asset's life.
Which depreciation method is best for tax purposes in Korea?
Korean tax law (Corporate Tax Act, Article 26 and related enforcement decrees) specifies allowable depreciation methods by asset type. Tangible assets like machinery typically use the declining balance or straight-line method, while buildings must use straight-line. The allowed DB rate is typically specified in tax law rather than calculated geometrically. Always consult a tax professional for compliance.
Why do the total depreciation amounts differ slightly between methods?
Due to rounding in this calculator (each year's depreciation is rounded to the nearest integer), the total accumulated depreciation may differ slightly from the exact depreciable amount (cost minus salvage). The declining balance total may also differ slightly because the geometric rate is applied to a rounded book value each year. These small rounding differences are expected.
What is salvage value and how does it affect depreciation?
Salvage value (also called residual value) is the estimated value of the asset at the end of its useful life. The depreciable amount equals cost minus salvage value. A higher salvage value means less total depreciation. For the declining balance method in this calculator, the rate is set so the book value reaches exactly the salvage value at the end of the useful life.
What is the difference between book depreciation and tax depreciation?
Book depreciation is recorded in the financial statements according to accounting standards (IFRS, K-GAAP). Tax depreciation follows tax law, which may specify different methods, rates, or useful lives. The difference between book and tax depreciation creates deferred tax liabilities or assets on the balance sheet. This calculator computes standard book depreciation under three common accounting methods.