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What is Straight Line Depreciation Method Formula?
Straightline depreciation method formula helps to evaluate the value of a fixed asset when the value of asset reduces periodically till it reaches salvage value. Straight line depreciation is a very convenient method and uses widely. It is mainly used when there is no pattern when an asset to be utilized over time.
The formula for straightline depreciation per annum is a cost of asset minus salvage value divided by the useful life of the asset.
Where,
 Cost of Asset= Purchase price of the asset.
 Salvage value= Value of the asset at the end of its useful life.
 The useful life of the asset= Number of periods of life of an asset.
Straight Line Depreciation Method Formula can be also calculated by the cost of asset minus salvage value multiplied by the rate of depreciation. The formula for same can be written as:
Where,
 Cost of Asset= Purchase price of the asset.
 Salvage value= Value of the asset at the end of its useful life.
 The rate of depreciation= in the single accounting period, it is the percentage of useful life.
Rate of depreciation = 1 /Useful Life* 100
Explanation of Straight Line Depreciation Method Formula
Step to the calculation of Straightline depreciation Method is as follows:
 Determine the cost of the asset.
 Find depreciable amount i.e. cost of asset minus salvage value.
 Determine the useful life of the asset.
 Divide depreciation amount by the useful life of the asset to get depreciation per annum.
Examples of Straight Line Depreciation Method Formula (with Excel Template)
Let’s take a few simples to advanced examples to understand Straight Line Depreciation Method Formula:
Example #1
A company has fixed machinery, cost of the asset was $1,000 it has a useful life of 4 years and its expected salvage value is $200, assuming machinery purchase in 1^{st} Jan’2011 and we are calculating depreciation value on 1^{st} Jan’2013.
 Depreciation Per Annum
So from the above calculation of Depreciation Per Annum will be:
Now as we want to calculate the value as on 1^{st} Jan’2013, and depreciation for 1 year is $200 for 3 years it will be:
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Example #2
A company has fixed asset, cost of the asset was $2,000 it has a useful life of 4 years and its expected salvage value is $300, assuming machinery purchase in 1^{st} Jan’2011 and we are calculating depreciation value on 1^{st} Jan’2013.
 Rate Of Depreciation
 Depreciation per annum
So from the above calculation of Depreciation Per Annum will be:
Now as we want to calculate the value as on 1^{st} Jan’2013, and depreciation for 1 year is $425 for 3 years it will be:
Example #3
Suppose a company has manufacturing machines, cost of machines was $12,000 and it has a useful life of 5 years and its expected salvage value is $500, assuming machinery purchase in 1^{st} Jan’2015 and Straightline depreciation rate.
First, we have to calculate the value of depreciation per annum which will be:
 The straight line depreciation rate
So from the above calculation of straight line depreciation rate will be:
Example #4
A company name Helly Power has machinery, cost of machines was $1,000,000 and useful life of 6 years having expected salvage value is $10,000, machinery was purchased on 1^{st} Jan’2012 now we have to calculate straightline depreciation rate for same.
Step 1 Cost of asset = $10,00,000
Step 2 Depreciable amount
Step 3 Useful life of Asset
Step 4 Divide depreciation amount by the useful life of the asset to get depreciation per annum.
Step 5 Straight line depreciation Rate
Now let see its effect on the book of accounts. In the next 6 years, book value for machinery will be equal to salvage value considering depreciation.
In account books, depreciation of the asset is recorded in depreciation expense account as debit and credit against it recorded in accumulated depreciation which is a contra asset account. Basically contra asset account reduces fixed asset account as these accounts are paired with fixed asset accounts.
The graph for same will be below where depreciation is represented with respect to the time period and this is straight line depreciation graph of machinery for 6 years till machinery reaches its salvage value i.e. $10,000
Straight Line Depreciation Method Formula Calculator
You can use the following Straight Line Depreciation Formula calculator
Depreciation Per Annum  
Cost of Asset  
Salvage Value  
Straight Line Depreciation Formula =  
Straight Line Depreciation Formula = 
 

Relevance and Uses of Straight Line Depreciation Formula
 It is very simple to use.
 It has very fewer chances of error.
 It is used when there is no pattern to find depreciation value.
 It will not have an impact on profit and loss statement because the straight line depreciation method does not impact profit and loss as asset depreciation is uniformly distributed.
 Its primary work is to find depreciation of fixed assets.
Depreciation is an important factor to be considered in accounting to get complete details of revenue generated by the company and it gets an actual financial condition of the company. In straightline depreciation, it is assumed that depreciation of the fixed asset is uniform over its useful life.
Straight line depreciation method is used as it can be applied for a long term and it is very easy to use. There are a few problems with this method like it will give approx. value, not an accurate one as it will have few errors and it will not reflect an accurate difference in usage of an asset. But still, it is a highly recommended method to find depreciation value of a fixed asset.
You can download this Straight Line Depreciation Formula Excel Template from hereStraight Line Depreciation Formula Excel Template
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