Straight-line depreciation

Straight-line depreciation spreads an asset's depreciable cost equally over its useful life. The annual charge is (cost minus residual value) ÷ useful life in years, producing a constant expense each period.

ByHoang TruongUpdated July 2, 2026

FrameworkDepreciation

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A delivery lorry costs €50,000 with an estimated residual value of €5,000 and a five-year useful life. Straight-line depreciation divides the €45,000 depreciable amount evenly: €9,000 charged in year one, €9,000 in year two, and so on through year five, an identical layer stacking up to the full €45,000, leaving the lorry carried at its €5,000 residual.

Where it fits

SubjectFinancial AccountingCoreTopicAsset Measurement & ValuationCore

The formula

LaTeX

\text{Annual depreciation} = \dfrac{\text{Cost} - \text{Residual value}}{\text{Useful life}}

Variables

$C$: Cost (purchase price plus directly attributable acquisition costs) (€)
$R V$: Residual value (estimated salvage value at end of useful life) (€)
$n$: Useful life (years)

Produces an identical charge each period; the most widely used depreciation method.

Check yourself

PracticeCORE

A company purchases a machine for €50,000, estimates a residual value of €5,000 and a useful life of five years. Using the straight-line method, what is the carrying amount of the machine at the end of year four?

Select an answer to check your understanding.