Course Outline
Join PRO

What is straight line depreciation?

Author:
Harold Averkamp, CPA, MBA

Definition of Straight-Line Depreciation

Straight-line depreciation is the most common method of allocating the cost of a plant asset to expense in the accounting periods during which the asset is used. With the straight-line method of depreciation, each full accounting year will report the same amount of 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.

In the U.S., a regular corporation may use the straight-line method of depreciation for its financial statements while at the same time be using one of the Internal Revenue Service’s faster depreciation methods on its federal income tax return.

Example of Straight-Line Depreciation

To illustrate straight-line depreciation, assume that a service business purchases equipment on the first day of an accounting year at a cost of $430,000. Further, the equipment is expected to be used in the business for 10 years. At the end of the 10 years, the company expects to receive the salvage value of $30,000. In this example, the straight-line depreciation method results in each full accounting year reporting depreciation expense of $40,000 ($400,000 of depreciable cost divided by 10 years). If the asset is purchased in the middle of the accounting year, there will be $20,000 of depreciation expense in the first and the eleventh accounting years and $40,000 in each of the accounting years 2 through 10.

Join PRO to Track Progress
Must-Watch Video

Learn How to Advance Your Accounting and Bookkeeping Career

  • Perform better at your current job
  • Refresh your skills to re-enter the workforce
  • Pass your accounting class
  • Understand your small business finances
Watch the Video

Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials

Read all 2,645 reviews

Features

PRO

PRO Plus

Features
Lifetime Access (One-Time Fee)
Explanations
Quizzes
Q&A
Word Scrambles
Crosswords
Bookkeeping Video Training
Financial Statements Video Training
Flashcards
Visual Tutorials
Quick Tests
Quick Tests with Coaching
Cheat Sheets
Business Forms
All PDF Files
Progress Tracking
Earn Badges and Points
Certificate - Debits and Credits
Certificate - Adjusting Entries
Certificate - Financial Statements
Certificate - Balance Sheet
Certificate - Income Statement
Certificate - Cash Flow Statement
Certificate - Working Capital
Certificate - Financial Ratios
Certificate - Bank Reconciliation
Certificate - Payroll Accounting

About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Learn More About Harold

Certificates of
Achievement

Certificates of Achievement

We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping:

  • Debits and Credits
  • Adjusting Entries
  • Financial Statements
  • Balance Sheet
  • Income Statement
  • Cash Flow Statement
  • Working Capital and Liquidity
  • Financial Ratios
  • Bank Reconciliation
  • Payroll Accounting
Badges and Points
  • Work towards and earn 30 badges
  • Earn points as you work towards completing our course
View PRO Plus Features
Course Outline
Take the Tour Join Pro Upgrade to Pro Plus