Friday, June 1, 2007

Calculating Straight Line Depreciation

Calculating straight line depreciation is a fairly easy process. There are three things you need to know to fiqure it out.

Cost

Residual Value

Useful Life

The formula is:

(cost - residual value)/useful life = yearly depreciation


For example, you buy a new car and it costs $12,000 and has residual value in 5 years of $2000.

(12,000 - 2000)/5 = 2000 per year for depreciation.


The accounting entry for this would be:


Depreciation Expense $2000 debit

Accumulated Depreciation $2000 credit



Technorati Tags: , ,

No comments: