Straight-Line vs Declining Balance Depreciation
Depreciation spreads an asset's cost over its useful life — but the two standard methods spread it very differently.
Straight-line: (cost − salvage value) ÷ useful life, the same amount every year. Declining balance: a fixed percentage of remaining book value each year, front-loading the expense.
Which method fits which situation
Straight-line is simpler and most common for financial reporting — steady, predictable expense each year. Declining balance (commonly 'double-declining') depreciates faster early on, often used for assets that lose value quickly upfront, like vehicles or computers.
Worked example ($10,000 asset, $1,000 salvage, 5 years)
Straight-line: $1,800/year flat, every year, for 5 years — total $9,000 depreciated. Double-declining: Year 1 = $4,000 (40% of $10,000), Year 2 = $2,400 (40% of $6,000), continuing until it floors exactly at the $1,000 salvage value in year 5.
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Frequently Asked Questions
What is salvage value?↓
The estimated resale or scrap value of the asset at the end of its useful life — depreciation only covers value lost between cost and salvage value, never below it.
Is this the same as tax depreciation (MACRS)?↓
No — this covers the two standard textbook methods. Tax depreciation systems like MACRS use specific IRS tables and conventions; consult a tax professional for tax filings.