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Straight line depreciation is the most commonly used and straightforward depreciation method for allocating the cost of a capital asset. It is calculated by simply dividing the cost of an asset, less its salvage value, by the useful life of the asset.
The straight-line depreciation equation measures how much value an item loses over time. The method assumes a fixed asset will lose the same amount of value each year of its useful life until it reaches its salvage value.
Straight Line Basis = (Purchase Price of Asset - Salvage Value) / Estimated Useful Life of Asset. To calculate the straight line basis, take the purchase price of an asset and...
Straight line basis is the simplest technique used to compute the value loss of an asset over its useful life. Also called straight line depreciation, straight line basis charges an equal expense amount to each accounting period. It assumes that the asset’s value diminishes equally over each accounting period during its useful life.
The straight line depreciation method requires only that you determine the useful life of the asset, estimate salvage value, and calculate annual or even monthly depreciation expense.
Straight-line depreciation is an accounting process that spreads the cost of a fixed asset over the period an organization expects to benefit from its use. Depreciation impacts a company's income statement, balance sheet, profitability and net assets, so it's important for it to be correct.
To calculate the straight-line depreciation rate for your asset, simply subtract the salvage value from the asset cost to get total depreciation, then divide that by useful life to get annual depreciation: annual depreciation = (purchase price - salvage value) / useful life.