1. What is Accumulated Depreciation?

Accumulated depreciation is the total amount of depreciation expense that has been recorded against an asset over its useful life. It represents the wear and tear, deterioration, or obsolescence of the asset.

2. How Does the Calculator Work?

The calculator uses the straight-line depreciation formula:

Where:

• \( \text{Cost} \) — Original purchase price of the asset
• \( \text{Salvage Value} \) — Estimated residual value at end of useful life
• \( \text{Useful Life} \) — Expected service life of the asset in years
• \( \text{Years} \) — Number of years depreciation is being calculated for

Explanation: The straight-line method spreads the cost evenly over the asset's useful life.

3. Importance of Depreciation Calculation

Details: Accurate depreciation calculation is crucial for financial reporting, tax purposes, and understanding the true value of assets on the balance sheet.

4. Using the Calculator

Tips: Enter all values in USD. Useful life must be at least 1 year. Years cannot exceed useful life (maximum depreciation = cost - salvage value).

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between depreciation and accumulated depreciation?
A: Depreciation is the annual expense, while accumulated depreciation is the cumulative total of all depreciation expenses to date.

Q2: When should I use straight-line vs. other depreciation methods?
A: Straight-line is simplest and most common when asset use is consistent over time. Accelerated methods may be better for assets that lose value faster early in their life.

Q3: Can accumulated depreciation exceed the asset's cost?
A: No, the maximum accumulated depreciation is cost minus salvage value.

Q4: How do I determine salvage value?
A: Estimate what the asset could be sold for at the end of its useful life. If unknown, $0 is often used.

Q5: Does this work for tax depreciation?
A: Tax rules may require different methods (like MACRS). Consult a tax professional for tax-specific calculations.