Finance
How to Calculate Asset Depreciation: Straight-Line vs Declining Balance
Two methods, two outcomes. We walk through the math, the tax implications and when to choose each — with a worked example.
Depreciation is how you spread an asset's cost over its useful life. Choose the wrong method and your balance sheet over- or under-states value for years.
Straight-line depreciation
Equal expense per period. Formula: (Cost − Salvage value) ÷ Useful life. Simple, predictable, beloved by tax authorities. Best for assets that lose value evenly — most office hardware fits.
Declining-balance (double-declining)
Front-loaded expense. Formula: Book value × (2 / Useful life). Reflects how a laptop actually loses value: a lot in year one, less every year after. Better matches reality for IT hardware; tax authorities sometimes restrict it.
Worked example: MacBook Pro 16" at $2,999, salvage $200, 36-month life
- Straight-line: ($2,999 − $200) / 36 = $77.75/month for 36 months.
- Declining balance (rate 2/36 ≈ 5.56%): month 1 = $166.61, month 12 ≈ $89.32, month 24 ≈ $47.78.
How AssetMon computes both
Set the method, salvage value, useful life and start date on the asset; AssetMon shows current book value, the full monthly schedule, and a fleet-wide depreciation report you can export to CSV for your accountant.