Straight line depreciation method—Fixed Assets Management

Fixed Assets Management supports the Straight line method (SL) for depreciating assets.

Under the straight line method, an asset's cost is allocated evenly over the number of months or years in its useful life. This method assumes that the asset's value diminishes at a constant rate throughout its useful life, resulting in an equal amount of depreciation recorded in each accounting period. It’s a common choice for its simplicity.

Conventions

This method supports the following conventions:

  • Full month

  • Half year

  • Full year

Formulas

Depreciation for each month:

(C−S)÷UL

Variables

  • C = Asset cost
  • S = Salvage value
  • UL = Useful life in months

  • Depreciation for the first year:

    (C−S)÷UL÷2

  • Depreciation for each subsequent year:

    (C−S)÷UL

  • Depreciation for the last year:

    C−S−AD

The last year is added as an extra period to apply the remaining depreciation.

Variables

  • C = Asset cost
  • S = Salvage value
  • UL = Useful life in years
  • AD = Accumulated depreciation from the previous years

Depreciation for each year:

(C−S)÷UL

Variables

  • C = Asset cost
  • S = Salvage value
  • UL = Useful life in years

Examples

Scenario:

  • Useful life: 60 months

  • Convention: Full month

  • Asset cost: £5,000.00

  • Salvage value: £100.00

  • Depreciable cost: £4,900

  • In-service date: April 22nd, 2020

  • Use salvage value: True

Schedule:

Depreciation schedule
Period Scheduled posting date Depreciation amount (£) Calculation
1 April 30th, 2020 81.67 4,900 depreciable cost ÷ 60 months of useful life
2 May 31st, 2020 81.67 4,900 depreciable cost ÷ 60 months of useful life
3 June 30th, 2020 81.67 4,900 depreciable cost ÷ 60 months of useful life
4 July 31st, 2020 81.67 4,900 depreciable cost ÷ 60 months of useful life
5 August 31st, 2020 81.67 4,900 depreciable cost ÷ 60 months of useful life
6 September 30th, 2020 81.67 4,900 depreciable cost ÷ 60 months of useful life
... ... ... ...
60 March 31st, 2025 81.67 4,900 depreciable cost ÷ 60 months of useful life

Scenario:

  • Useful life: 5 years

  • Convention: Half year

  • Asset cost: £5,000.00

  • Salvage value: £100.00

  • Depreciable cost: £4,900

  • In-service date: April 22nd, 2020

  • First tax month: January

  • Use salvage value: True

Schedule:

Depreciation schedule
Period Scheduled posting date Depreciation amount (£) Calculation
1 December 31st, 2020 490.00

4,900 depreciable cost ÷ 5 years of useful life ÷ 2
2 December 31st, 2021 980.00 4,900 depreciable cost ÷ 5 years of useful life
3 December 31st, 2022 980.00 4,900 depreciable cost ÷ 5 years of useful life
4 December 31st, 2023 980.00 4,900 depreciable cost ÷ 5 years of useful life
5 December 31st, 2024 980.00 4,900 depreciable cost ÷ 5 years of useful life
6 December 31st, 2025 490.00

4,900 depreciable cost − 4,410 accumulated depreciation

The remaining depreciation is applied in an extra period at the end of the asset's useful life.

Scenario:

  • Useful life: 5 years

  • Convention: Full year

  • Asset cost: £5,000.00

  • Salvage value: £100.00

  • Depreciable cost: £4,900

  • In-service date: April 22nd, 2020

  • First tax month: January

  • Use salvage value: True

Schedule:

Depreciation schedule
Period Scheduled posting date Depreciation amount (£) Calculation
1 December 31st, 2020 980.00 4,900 depreciable cost ÷ 5 years of useful life
2 December 31st, 2021 980.00 4,900 depreciable cost ÷ 5 years of useful life
3 December 31st, 2022 980.00 4,900 depreciable cost ÷ 5 years of useful life
4 December 31st, 2023 980.00 4,900 depreciable cost ÷ 5 years of useful life
5 December 31st, 2024 980.00 4,900 depreciable cost ÷ 5 years of useful life