Straight-Line Depreciation Formula is an accounting technique used to calculate the expense of long-term assets over time. It spreads out the cost of the asset evenly for a predetermined period of time, in order to provide a realistic estimate of its value at any given point throughout its useful life.
The formula for Straight Line Depreciation is: Asset’s Cost Basis minus Salvage Value divided by the Useful Life of the Asset = Annual Depreciation Expense. This means that yearly, you subtract the salvage value from the asset’s cost basis and divide that total by the useful life of the asset which will give you the annual depreciation expense.
This method of calculating depreciation can prove to be a very effective way to manage expenses when it comes to business operations. With this formula, businesses can plan and budget accordingly with a more accurate picture of what their long-term asset costs will be over time.