Calculate the annual straight-line depreciation expense and book value of an asset over its useful life.
This calculator computes straight-line depreciation - the most common method for spreading the cost of an asset (minus its expected salvage value) evenly over its useful life - showing the annual depreciation expense and the asset's declining book value each year.
Straight-line depreciation spreads the "depreciable amount" (cost minus salvage value) evenly across each year of the asset's useful life, so the same dollar amount is expensed every year, and the book value declines by that same amount each year until it reaches the salvage value.
Formula: Annual Depreciation = (Asset Cost − Salvage Value) ÷ Useful Life. Book Value at end of Year N = Asset Cost − (Annual Depreciation × N), down to a minimum of the Salvage Value.
Example: An asset costing CA$50,000 with an expected salvage value of CA$5,000 and a 10-year useful life would depreciate by CA$4,500 per year, leaving a book value of CA$45,500 after year one, declining steadily to CA$5,000 (the salvage value) after 10 years. (Note: this example is for illustration purposes only.)
It's important to understand that straight-line depreciation, as calculated here, is an accounting method used for financial statements and management reporting - but for income tax purposes in Canada, businesses generally don't deduct "depreciation" directly. Instead, the Canada Revenue Agency uses a system called Capital Cost Allowance (CCA), which assigns assets to prescribed CCA classes (each with its own maximum annual percentage rate) and generally uses a declining-balance method (a percentage of the remaining undepreciated balance each year, rather than a fixed dollar amount). For example, most machinery and equipment fall into specific CCA classes with rates that differ from whatever useful life and salvage value a business might use for its own accounting records. Additionally, the "half-year rule" generally allows only 50% of the normal CCA rate to be claimed in the year an asset is acquired, regardless of when during the year it was purchased (some exceptions and accelerated investment incentives have applied in various years). Because of these differences, the depreciation expense on a business's financial statements (often straight-line, as this calculator computes) frequently differs from the CCA claimed on its tax return - both are valid, but for different purposes. Always consult the current CRA guidance or an accountant for the correct CCA class and rate for a specific asset.
No. Straight-line depreciation (calculated here) is an accounting method that spreads an asset's cost evenly over its useful life for financial statement purposes. CCA is the tax depreciation system used by the CRA, which assigns assets to specific classes with prescribed rates and generally uses a declining-balance method, plus rules like the half-year rule in the year of acquisition. The two figures often differ for the same asset.
The half-year rule generally limits the CCA you can claim in the year you acquire an asset to 50% of what the normal rate would otherwise allow, regardless of when in the year the asset was purchased. This effectively spreads the first year's deduction over what would normally be the first and last years of the asset's CCA schedule. Some specific incentive programs have provided exceptions to this rule in certain years.
Salvage value (also called residual value) is the estimated amount an asset could be sold for at the end of its useful life - for example, scrap value for machinery, or trade-in value for a vehicle. It's often estimated based on industry experience or historical resale values for similar assets; if you expect an asset to have no value at the end of its useful life, enter CA\$0.
Book value represents the remaining "undepreciated" portion of an asset's cost on the balance sheet, which matters for financial reporting, calculating gain or loss on disposal (selling price minus book value), and certain financial ratios. It's an accounting figure, not necessarily what the asset would actually sell for - actual market value can be higher or lower than book value.
Yes - other accounting methods include declining-balance (a percentage of the remaining book value each year, similar in concept to CCA but using a different rate/class system) and units-of-production (based on actual usage rather than time). Straight-line is the simplest and most commonly used for general accounting purposes due to its predictability, but the appropriate method can depend on how the asset's value is actually consumed over time.
No, this calculator assumes the asset is depreciated for full years starting from acquisition. In practice, if an asset is purchased partway through a fiscal year, the first year's depreciation expense might be prorated for the portion of the year the asset was in use - check your accounting policies for how partial years are handled.
Disclaimer: The information and figures provided on this page are for educational and illustrative purposes only and do not constitute tax or accounting advice. This calculator computes straight-line depreciation for accounting purposes only and does not reflect the Capital Cost Allowance (CCA) system used for Canadian income tax, which uses different classes, rates, and rules (including the half-year rule). Always consult a qualified accountant or the current CRA guidance for tax depreciation purposes.