Depreciation Schedule (Straight-Line)

About the Depreciation Schedule (Straight-Line)

When a business buys a long-lived asset — a vehicle, machine, or piece of equipment — it does not expense the whole cost at once. Instead it spreads that cost across the years the asset is used, a process called depreciation. This schedule builds the most common version, straight-line depreciation, which allocates an equal amount of expense to each year of the asset's useful life.

A depreciation schedule serves two purposes at once. For accounting, it matches the asset's cost to the periods that benefit from it, so profit is not distorted by a single huge purchase. For taxes, it substantiates the deduction you claim each year. And for planning, the declining book value tells you what the asset is worth on your books at any point and hints at when replacement will be due.

Straight-line is the simplest and most widely used method precisely because it is predictable — the same expense every year makes budgeting and forecasting straightforward.

How the Depreciation Schedule (Straight-Line) works

You enter three inputs: Asset Cost (what you paid), Salvage Value (estimated worth at the end of its life), and Useful Life in years. The core formula is Annual Depreciation = (Asset Cost − Salvage Value) ÷ Useful Life. That single figure repeats every year under the straight-line method.

The schedule then builds a row for each year showing three running figures: Annual Depreciation (constant), Accumulated Depreciation (the sum of all depreciation taken so far), and Book Value (Asset Cost minus accumulated depreciation). Book value starts at the full cost and steps down each year.

By design, the schedule lands book value exactly at the salvage value in the final year — the depreciable base is only the portion above salvage, never the full cost. Depreciation never runs the book value below salvage, because salvage represents what you expect to recover when you dispose of the asset.

Worked example

Using the defaults, Asset Cost is $25,000, Salvage Value is $2,500, and Useful Life is 5 years. The depreciable base is $25,000 − $2,500 = $22,500, so Annual Depreciation = $22,500 ÷ 5 = $4,500 every year.

The schedule reads: Year 1 — depreciation $4,500, accumulated $4,500, book value $20,500. Year 2 — accumulated $9,000, book value $16,000. Year 3 — accumulated $13,500, book value $11,500. Year 4 — accumulated $18,000, book value $7,000. Year 5 — accumulated $22,500, book value $2,500, which lands precisely on the salvage value. Total depreciation over the five years equals the $22,500 depreciable base, exactly as expected.

Tips & common mistakes

• Estimate salvage value realistically — it is what you expect to sell or scrap the asset for at the end. Setting salvage to zero maximizes annual depreciation but may overstate the expense if the asset retains real resale worth.
• Match useful life to how long the asset will actually serve the business; tax authorities publish recovery periods by asset class, and using an unrealistic life invites scrutiny.
• Straight-line is not the only method. If an asset loses value fastest early on — like many vehicles and electronics — an accelerated method may reflect reality better, though it is more complex.
• Book value is not market value. The schedule tells you the accounting value, which can differ sharply from what the asset would actually fetch on a given day.
• For tax filings, check whether provisions like Section 179 or bonus depreciation let you deduct more up front; this schedule shows the standard straight-line treatment, which those rules can override.

Depreciation Schedule (Straight-Line): frequently asked questions