Straight line depreciation is a common method of matching a plant asset’s cost to the accounting periods in which it’s in service is likely to be straight line depreciation. The total amount of depreciation over the years of the asset’s useful life will be the asset’s cost minus any expected or assumed salvage value.
The formulas used for straight-line depreciation are;
- Depreciation per annum = (cost – residual value) / useful life.
- Depreciation per annum = (cost – residual value) x rate of depreciation.
The rate of depreciation can be calculated by: (1/useful life) x 100%.
Example: an asset having a useful life of 8 year is 12.5% p.a
1/8 x100% = 12.5% per year