## How to use the depreciation calculator

**Depreciation method**- Choose which depreciation method to use. There are two options here: straight line depreciation and sum-of-years-digits depreciation.**Cost**- Original cost of the asset.**Salvage**- The salvage value after the asset has been fully depreciated.**Life**- The number of periods (year here) that depreciates the asset.

## What is straight line depreciation

Straight line is the simplest method, it allocates depreciation value evenly on a number of periods. The calculation formula is:

Annual depreciation amount = (Original cost of asset - Salvage value)/number of periods

example: an asset has original cost of $1000, and salvage value of $100 after 3 years.

Annual depreciation amount is (1000-100)/3 = $300.

## What is sum-of-years-digits depreciation

The sum-of-years-digits method has a more accerlerated write-off than straight line method.

Example: an asset will be depreciated in 8 years.

Sum of years digits: 1 + 2 + 3 + 4 + 5 + 6 + 7 + 8 = 36,

Depreciation rate:

Year 1: 8/36

Year 2: 7/36

Year 3: 6/36

Year 4: 5/36

Year 5: 4/36

Year 6: 3/36

Year 7: 2/36

Year 8: 1/36