Depreciation Calculator for Equipment

Equipment Depreciation Calculator

Equipment Purchase Cost ($):

Estimated Salvage Value ($):

Useful Life (Years):

Depreciation Method: Straight-Line Declining Balance Sum-of-the-Years' Digits

Declining Balance Factor (e.g., 2 for Double Declining):

Depreciation Schedule:

Total Depreciable Amount:

Total Depreciation Recognized:

Final Book Value:

Year	Annual Depreciation ($)	Accumulated Depreciation ($)	End-of-Year Book Value ($)
' + results[i].year + '	' + results[i].annualDepreciation.toFixed(2) + '	' + results[i].accumulatedDepreciation.toFixed(2) + '	' + results[i].endBookValue.toFixed(2) + '

'; tableContainer.innerHTML = tableHTML; document.getElementById("totalDepreciableAmount").innerText = "$" + depreciableAmount.toFixed(2); document.getElementById("totalDepreciationRecognized").innerText = "$" + totalDepreciationRecognized.toFixed(2); document.getElementById("finalBookValue").innerText = "$" + finalBookValue.toFixed(2); resultDiv.style.display = "block"; } // Initial call to set visibility based on default selection toggleDecliningBalanceFactor();

Understanding Equipment Depreciation

Depreciation is an accounting method used to allocate the cost of a tangible asset over its useful life. Instead of expensing the entire cost of an asset in the year it was purchased, depreciation allows businesses to spread out that cost over the years the asset is expected to generate revenue. This provides a more accurate picture of a company's profitability and asset value over time.

Why is Depreciation Important for Equipment?

Accurate Financial Reporting: It matches the expense of using an asset with the revenue it helps generate, providing a clearer view of a company's financial performance.
Tax Benefits: Businesses can deduct depreciation expenses, reducing their taxable income.
Asset Valuation: It helps in determining the current book value of an asset, which is crucial for financial statements, insurance, and potential sales.
Capital Planning: Understanding depreciation helps businesses plan for future equipment replacement.

Common Depreciation Methods Explained

There are several methods to calculate depreciation, each resulting in a different depreciation schedule. Our calculator supports three of the most common:

1. Straight-Line Depreciation

This is the simplest and most widely used method. It assumes that an asset loses an equal amount of value each year over its useful life. The formula is:

Annual Depreciation = (Equipment Cost - Salvage Value) / Useful Life

Example: An equipment costs $50,000, has a salvage value of $5,000, and a useful life of 5 years.
Annual Depreciation = ($50,000 - $5,000) / 5 = $45,000 / 5 = $9,000 per year

2. Declining Balance Depreciation (e.g., Double Declining Balance)

This is an accelerated depreciation method, meaning it expenses more of an asset's cost in the earlier years of its useful life and less in later years. The most common form is Double Declining Balance (DDB), where the straight-line rate is doubled.

Depreciation Rate = (Declining Balance Factor / Useful Life)
Annual Depreciation = Beginning-of-Year Book Value * Depreciation Rate

The depreciation stops when the book value reaches the salvage value. The declining balance factor is typically 2 for Double Declining Balance, but can be 1.5 for 150% Declining Balance, etc.

Example (Double Declining Balance): Equipment cost $50,000, salvage value $5,000, useful life 5 years.
Straight-line rate = 1/5 = 20%. DDB rate = 2 * 20% = 40%.

Year 1: $50,000 * 40% = $20,000. Book Value = $30,000
Year 2: $30,000 * 40% = $12,000. Book Value = $18,000
Year 3: $18,000 * 40% = $7,200. Book Value = $10,800
Year 4: $10,800 * 40% = $4,320. Book Value = $6,480
Year 5: Book value ($6,480) is above salvage value ($5,000). Max depreciation is $6,480 – $5,000 = $1,480. Book Value = $5,000.

3. Sum-of-the-Years' Digits (SYD) Depreciation

Another accelerated method, SYD also results in higher depreciation in the early years. It uses a fraction based on the remaining useful life of the asset.

Sum of Years' Digits (SYD) = Useful Life * (Useful Life + 1) / 2
Annual Depreciation = (Equipment Cost - Salvage Value) * (Remaining Useful Life / SYD)

Example: Equipment cost $50,000, salvage value $5,000, useful life 5 years.
Depreciable amount = $45,000. SYD = 5 * (5+1) / 2 = 15.

Year 1: $45,000 * (5/15) = $15,000
Year 2: $45,000 * (4/15) = $12,000
Year 3: $45,000 * (3/15) = $9,000
Year 4: $45,000 * (2/15) = $6,000
Year 5: $45,000 * (1/15) = $3,000

How to Use the Equipment Depreciation Calculator

Equipment Purchase Cost: Enter the initial cost of the equipment.
Estimated Salvage Value: Input the expected residual value of the equipment at the end of its useful life. This is the amount you expect to sell it for, or its scrap value.
Useful Life (Years): Specify the number of years the equipment is expected to be productive for your business.
Depreciation Method: Choose the accounting method you wish to use for depreciation (Straight-Line, Declining Balance, or Sum-of-the-Years' Digits).
Declining Balance Factor: If you select 'Declining Balance', enter the factor (e.g., '2' for Double Declining Balance). This field will appear only when 'Declining Balance' is selected.
Calculate Depreciation: Click the button to generate a detailed depreciation schedule, including annual depreciation, accumulated depreciation, and the end-of-year book value for each year of the equipment's useful life.

This calculator provides a clear breakdown, helping you understand the financial impact of your equipment over its operational lifespan.