Depreciation calculated is an accounting concept that assigns the cost of a fixed asset over its lifespan. In other words, it determines what portion of the asset’s value you can write off as an expense each year. To calculate depreciation, one must consider the cost of the asset, its estimated useful life, and any estimated salvage value. For example, if a business purchased a computer for $1,000 with an estimated useful life of five years and no salvage value, the annual depreciation would be equal to one-fifth of the initial cost or $200.