Assets & Liabilities
Straight-Line Depreciation
The simplest depreciation method: equal expense every period over an asset's useful life.
Straight-line depreciation books the same depreciation expense each period: (cost − salvage value) ÷ useful life. A $24,000 asset with a four-year life and no salvage value depreciates $600 a month — the same every month, no matter what the asset actually does that period. It's the default method for financial reporting because it's predictable, easy to audit, and doesn't require usage estimates.
Note that financial-statement depreciation and tax depreciation are different systems. Your books may use straight-line while the tax code allows faster recovery (MACRS, bonus depreciation) — meaning your P&L and your tax return legitimately show different depreciation numbers, reconciled through deferred tax entries. Choosing accelerated methods on the books accelerates expense recognition, which lowers reported income now; which method you use where is a policy decision with real tax consequences.
Example
A $30,000 delivery vehicle with a 5-year life and $6,000 salvage value: ($30,000 − $6,000) ÷ 5 years = $4,800 per year, or $400 per month. Identical expense in month 1 and month 60.
Common questions
When should you use straight-line depreciation?
When the asset's economic benefit is consumed evenly over time — most office equipment, furniture, and software. Assets whose value or usage drops sharply early (vehicles, some machinery) are often better matched with accelerated methods.
How is straight-line different from accelerated depreciation?
Straight-line spreads cost evenly. Accelerated methods (declining balance, sum-of-years-digits) book more expense in early years and less later. Same total over the asset's life, different timing — which changes reported income by period and, for tax purposes, when deductions land.
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