Straight-Line Depreciation
A depreciation method that allocates the cost of an asset evenly over its useful life in equal annual amounts.
What is Straight-Line Depreciation?
Straight-line depreciation is the most widely used method for allocating the cost of a tangible asset over its useful life. Under this method, the annual depreciation expense is calculated as: (Cost − Salvage Value) ÷ Useful Life in Years. The result is the same depreciation charge each year, creating a predictable, stable reduction in the asset's book value. Straight-line depreciation is simple, transparent, and appropriate when the asset is expected to generate economic benefits evenly over its life — such as buildings, furniture, and certain equipment. It contrasts with accelerated depreciation methods (like double declining balance) that front-load expenses, and with units-of-production depreciation that varies with output.
Example
A company purchases manufacturing equipment for $500,000 with an estimated useful life of 10 years and a salvage value of $50,000. Annual straight-line depreciation equals ($500,000 − $50,000) ÷ 10 = $45,000 per year. After five years, accumulated depreciation totals $225,000, and the net book value is $275,000. This consistent $45,000 annual expense makes financial projections straightforward and is the standard treatment for most assets in GAAP financial statements.