Depreciation

The process of spreading the cost of a long-term (fixed) asset over its useful life.

Depreciation

What you paid for the asset (purchase price + costs to get it ready for use)

Cost

How long you’ll use the asset

Useful life

What you can sell it for at the end

Salvage Value

Cost – Salvage Value

Depreciation Cost

Asset’s cost – accumulated depreciation

Book Value

Total depreciation recorded so far (contra-asset)

Accumulated Depreciation

Depreciation Expense is (Credit/Debit)

Debit

Accumulated Depreciation is an (Credit/Debit)

Credit

Straight Line Method formula:

Cost - Salvage/Useful Life

An account that is linked to an asset but has a credit balance. Its job is to reduce the value of that asset on the balance sheet — without directly lowering the original asset’s account.

Contra-band

Double Decline Method:

Depreciation Expense = Rate x Book Value

Unit of Production Formula:

Depreciation Per Unit = Cost - Salvage/ Total Unit #