Straight line depreciation

Straight Line Depreciation

The simplest depreciation method that allocates an equal amount of expense to each period of an asset’s useful life, calculated by dividing the asset’s depreciable cost (acquisition cost minus salvage value) by the number of accounting periods in its useful life.

For instance, a delivery vehicle purchased for $50,000 with an expected salvage value of $5,000 after a five-year useful life would have annual straight-line depreciation of $9,000 [($50,000 - $5,000) ÷ 5].

Straight line depreciation assumes that an asset’s economic benefits are consumed evenly over time. While other methods may better match actual usage patterns or economic benefits, straight line remains popular for its simplicity, consistency, and straightforward application. It produces uniform expense recognition that smooths reported income across periods and is commonly used for buildings, furniture, and other assets that deteriorate relatively evenly throughout their useful lives.