# Depreciation Calculation

This document helps you understand the depreciation calculation in detail with suitable examples. Before that, here are a few terms that you should be aware of:

Terms |
Description |
---|---|

Purchase Value |
The cost at which the asset was purchased. |

Current Value |
The asset’s value at the start of the depreciation period. |

Salvage Value |
The estimated value of the asset at the end of its useful life. |

Depreciated Value |
The value that is depreciated from the asset in every frequency (monthly or yearly). |

Depreciable Value |
The value that can be depreciated from the asset’s current value, and is calculated as:Depreciable Value = Current Value - Salvage Value. |

Now, let us have a look at how depreciation is calculated for a fixed asset you record in Zoho Books. There are two types of depreciation methods:

## Straight Line Depreciation

In this depreciation method, the asset will be depreciated in two ways:

### Pro Rata

**Depreciated Value** = **(Depreciable Value / Remaining No. of Depreciation days)** * **No. of Days in Current Depreciation**

where,

**Depreciable Value = Current Value - Salvage Value**

**Remaining No. of Depreciation Days**: The total number of days remaining for the asset to get fully depreciated.

**No. of Days in Current Depreciation**: The total number of days in the selected frequency (monthly/yearly) for depreciation.

### Non-Pro Rata

**Depreciated Value = Depreciable Value / Remaining Life Period**

where,

**Remaining Life Period**: The total number of years or months between current depreciation’s start date and asset’s depreciation end date.

## Declining Balance Method

In this depreciation method, the asset will be depreciated in two ways:

### Pro Rata

**Depreciated Value = ((Depreciable Value * Percentage/100) / No. of Days in the Given Year) * No. of Days**

where,

**Percentage**: The percentage provided for the declining balance method, calculated annually.

**No. of Days in the Given Year**: The total number of days in that particular year.

**No. of Days**: The total number of days in that particular depreciation period.

### Non-Pro Rata

**Annual Depreciation = Depreciable Value * Percentage/100**

where,

**Percentage**: The percentage provided for the declining balance method.

This is used to calculate the annual depreciation of a fixed asset. To calculate the asset’s monthly depreciation:

**Monthly Depreciation = Annual Depreciation / 12**

## Examples

### Straight Line Method for Yearly Asset Depreciation on a Non-Pro Rata Basis

Frequency |
Computation Type |
Start Date |
Total Life Period |
End Date |
---|---|---|---|---|

Yearly | Non-Pro Rata | 01/01/2020 | 60 | 31/03/2024 |

If the current value of the asset is **$10,000**, and the fiscal year you follow in your organization is **April to March**.

With respect to the current value of the asset, let us start depreciating the asset using the **Straight Line Method**.

As the frequency of depreciation is given as **Yearly**, convert the total life period to years.

**Total Life Period = 60/12 = 5**

Therefore, total life period is **5 years**.

In **March 2020**, the value of the asset will be:

**Depreciated Value = Depreciable Value / Remaining Life Period**

**Depreciated Value = 10,000 / 5**

**Depreciated Value = 2,000**

**Current Asset Value = 10,000 - 2,000 = 8,000**

Therefore, by the end of **March 2020**, the current value of the asset will be **$8,000**.

In **March 2021**, the value of the asset will be:

**Depreciated Value = Depreciable Value / Remaining Life Period**

**Depreciated Value = 8,000 / 4**

**Depreciated Value = 2,000**

**Current Asset Value = 8,000 - 2,000 = 6,000**

Therefore, by **March 2021**, the current value of the asset will be **$6,000**.

In **March 2022**, the value of the asset will be:

**Depreciated Value = Depreciable Value / Remaining Life Period**

**Depreciated Value = 6,000 / 3**

**Depreciated Value = 2,000**

**Current Asset Value = 6,000 - 2,000 = 4,000**

Therefore, by **March 2022**, the current value of the asset will be **$4,000**.

In **March 2023**, the value of the asset will be:

**Depreciated Value = Depreciable Value / Remaining Life Period**

**Depreciated Value = 4,000 / 2**

**Depreciated Value = 2,000**

**Current Asset Value = 4,000 - 2,000 = 2,000**

Therefore, by **March 2023**, the current value of the asset will be **$2,000**.

In **March 2024**, the value of the asset will be:

**Depreciated Value = Depreciable Value / Remaining Life Period**

**Depreciated Value = 2,000 / 1**

**Depreciated Value = 2,000**

**Current Asset Value = 2,000 - 2,000 = $0**

Therefore, by the end of March 2024, the current value of the asset becomes 0 or reaches its salvage value, which means that the asset’s useful life is complete or the asset is completely depreciated.

### Straight Line Method for Monthly Asset Depreciation on a Non-Pro Rata Basis

Frequency |
Computation Type |
Start Date |
Total Life Period |
End Date |
---|---|---|---|---|

Monthly | Non-Pro Rata | 01/04/2020 | 30 | 30/09/2022 |

For the above case, the depreciation is calculated on a **Monthly** basis using the **Straight Line Method**.

In **April 2020**, the value of the asset will be:

**Depreciated Value = 10,000 / 30 = 333.33**

**Current Asset Value = 10,000 - 333.33 = 9666.67**

Therefore, by the end of **April 2020**, the current value of the asset will be **$9666.67**

In **May 2020**, the value of the asset will be:

**Depreciated Value = 9666.67 / 29 = 333.33**

**Current Asset Value = 9666.67 - 333.33 = 9333.34**

Therefore, by the end of **May 2020**, the current value of the asset will be **$9333.34**

In **June 2020**, the value of the asset will be:

**Depreciated Value = 9333.34 / 28 = 333.33**

**Current Asset Value = 9333.34 - 333.33 = 9000.01**

Therefore, by the end of **June 2020**, the current value of the asset will be **$9000.01**

When you keep depreciating the asset in this way, the current value of the asset at the end of September 2022 will become 0 or reaches its salvage value, which means that the asset’s useful life is complete or the asset is completely depreciated.

### Straight Line Method for Yearly Asset Depreciation on a Pro Rata Basis

Frequency |
Computation Type |
Start Date |
Total Life Period |
End Date |
---|---|---|---|---|

Yearly | Pro Rata | 01/01/2020 | 60 | 31/12/2024 |

For the above case, the depreciation is calculated on a **Yearly** basis using the **Straight Line Method**.

The remaining number of depreciation days (**until 31/12/2024**) = **1827**.

As the financial year ends by March 2020, the depreciation is calculated for the first three months (**01/01/2020 to 31/03/2020**) separately.

So, the number of days in the current depreciation = **91**.

In **March 2020**, the value of the asset will be:

**Depreciated Value = (Depreciable Value / Remaining No. of Depreciation Days) * The No. of Days in the Current Depreciation**

**Depreciated Value = (10000 / 1827) * 91**

**Depreciated Value = 5.4375 * 91**

**Depreciated Value = 498.09**

Therefore, the **current value of the asset at the end of 2020 = 10000 - 498.09 = $9501.91**

In **March 2021**, the value of the asset will be:

**Depreciated Value = (Depreciable Value / Remaining No. of Depreciation Days) * The No. of Days in the Current Depreciation**

**Depreciated Value = (9501.91 / 1736) * 365**

**Depreciated Value = 5.4735 * 365**

**Depreciated Value = 1997.83**

Therefore, the **current value of the asset at the end of 2021 = 9501.91 - 1997.83 = $7504.08**

In **March 2022**, the value of the asset will be:

**Depreciated Value = (Depreciable Value / Remaining No. of Depreciation Days) * The No. of Days in the Current Depreciation**

**Depreciated Value = (7504.08 / 1371) * 365**

**Depreciated Value = 5.4735 * 365**

**Depreciated Value = 1997.91**

Therefore, the **current value of the asset at the end of 2022 = 7504.08 - 1997.91 = $5506.17**

When you keep depreciating the asset this way, the current value of the asset at the end of December 2025 will become 0 or reaches its salvage value, which means that the asset’s useful life is complete or the asset is completely depreciated.

### Straight Line Method for Monthly Asset Depreciation on a Pro Rata Basis

Frequency |
Computation Type |
Start Date |
Total Life Period |
End Date |
---|---|---|---|---|

Monthly | Pro Rata | 01/01/2020 | 13 | 01/01/2021 |

For the above case, the depreciation is calculated on a **Monthly** basis using the **Straight Line Method**.

The total number of remaining days (until the asset’s useful life) = **397 days**.

By the end of **January 2020**, the value of the asset will be:

**Depreciated Value = (10000 / 397) * 31**

**Depreciated Value = 25.1889 * 31**

**Depreciated Value = 780.8559**

Therefore, the **current value of the asset (until January 2020) = 10000 - 780.8559 = $9219.1441**

By the end of **February 2020**, the value of the asset will be:

**Depreciated Value = (9219.1441 / 366) * 29**

**Depreciated Value = 25.1889 * 29**

**Depreciated Value = 730.4781**

Therefore, the **current value of the asset (until February 2020) = 9219.1441 - 730.4781 = $8488.666**

When you keep depreciating the asset this way, the current value of the asset at the end of January 2021 will become 0 or reaches its salvage value, which means that the asset’s useful life is complete or the asset is completely depreciated.

### Declining Balance Method for Yearly Asset Depreciation on a Non-Pro Rata Basis

Frequency |
Computation Type |
Start Date |
Total Life Period |
End Date |
---|---|---|---|---|

Yearly | Non-Pro Rata | 01/01/2020 | 60 | 31/03/2024 |

The current value of the asset is **$10,000**, and the fiscal year you follow in your organization is **April to March**.

With respect to the current value of the asset, let us start depreciating the asset using the **Declining Balance Method**.

The **Depreciation Percentage = 20% = 20 / 100 = 0.20**

By the end of **March 2020**, the value of the asset will be:

**Depreciated Value = Depreciable Value * Percentage/100**

**Depreciated Value = 10000 * 0.20**

**Depreciated Value = 2000**

Therefore, the **current value of the asset is 10000 - 2000 = $8000**.

By the end of **March 2021**, the value of the asset will be:

**Depreciated Value = Depreciable Value * Percentage/100**

**Depreciated Value = 8000 * 0.20**

**Depreciated Value = 1600**

Therefore, the **current value of the asset is 8000 - 1600 = $6400**.

When you keep depreciating the asset this way, the current value of the asset at the end of March 2024 will become 0 or reaches its salvage value, which means that the asset’s useful life is complete or the asset is completely depreciated.

### Declining Balance Method for Monthly Asset Depreciation on a Non-Pro Rata Basis

Frequency |
Computation Type |
Start Date |
Total Life Period |
End Date |
---|---|---|---|---|

Monthly | Non-Pro Rata | 01/01/2020 | 13 | 31/01/2021 |

With respect to the current value of the asset, let us start depreciating the asset using the **Declining Balance Method**.

To calculate the asset’s **monthly depreciation** using the declining balance method, find the annual depreciation value and divide it by 12.

The depreciated value at the end of **January 2020** will be:

**Depreciated Value (annual) = 10000 * 0.20 = 2000**

Now, **Depreciated Value (monthly) = 2000 / 12 = 166.67**

The **current value of the asset = 10000 - 166.67 = $9833.33**

The asset’s value at the end of **February 2020** will be:

**Depreciated Value (monthly) = 2000 / 12 = 166.67**

The **current value of the asset = 9833.33 - 166.67 = $9666.66**

The asset’s value at the end of **March 2020** will be:
**Depreciated Value (monthly) = 2000 / 12 = 166.67**

The **current value of the asset = 9666.66 - 166.67 = $9499.99**

The asset’s value at the end of **April 2020** will be:

**Depreciated Value (annual) = 9499.99 * 0.20 = 1899.99**

**Depreciated Value (monthly) = 1899.99 / 12 = 158.33**

The **current value of the asset = 9499.99 - 158.33 = $9341.66**

When you keep depreciating the asset this way, the current value of the asset at the end of January 2021 will become 0 or reaches its salvage value, which means that the asset’s useful life is complete or the asset is completely depreciated.

### Declining Balance Method for Yearly Asset Depreciation on a Pro Rata Basis

Frequency |
Computation Type |
Start Date |
Total Life Period |
End Date |
---|---|---|---|---|

Yearly | Pro Rata | 01/01/2020 | 60 | 31/12/2024 |

The number of days in the current year = **366**

The number of days in the current depreciation period = **91**

The asset’s value at the end of **March 2020** will be:

**Depreciated Value = ((Depreciable Value * Percentage/100) / No. of Days in the Given Year) * No. of Days**

**Depreciated Value = ((10000 * 0.20) / 366 ) * 91**

**Depreciated Value = (2000 / 366) * 91**

**Depreciated Value = 5.464 * 91**

**Depreciated Value = 497.224**

The **current value of the asset is 10000 - 497.224 = $9502.776**

The asset’s value at the end of **March 2021** will be:

**Depreciated Value = ((Depreciable Value * Percentage/100) / No. of Days in the Given Year) * No. of Days**

**Depreciated Value = ((9502.776 * 0.20) / 365) * 365**

**Depreciated Value = (1900.555 / 365) * 365**

**Depreciated Value = 5.207 * 365**

**Depreciated Value = 1900.555**

The **current value of the asset is 9502.776 - 1900.555 = $7602.17**

When you keep depreciating the asset this way, the current value of the asset at the end of December 2024 will become 0 or reaches its salvage value, which means that the asset’s useful life is complete or the asset is completely depreciated.

### Declining Balance Method for Monthly Asset Depreciation on a Pro Rata Basis

Frequency |
Computation Type |
Start Date |
Total Life Period |
End Date |
---|---|---|---|---|

Monthly | Pro Rata | 01/01/2020 | 13 | 31/01/2021 |

The number of days in the current year = **366**

The number of days in the current depreciation period (January 2020) = **31**

The asset’s value at the end of **January 2020** will be:

**Depreciated Value = ((10000 * 0.20) / 366) * 31**

**Depreciated Value = (2000 / 366) * 31**

**Depreciated Value = 5.464 * 31 = 169.38**

The **current value of the asset = 10000 - 169.38 = $9830.6**

The asset’s value at the end of **February 2020** will be:

**Depreciated Value = ((10000 * 0.20) / 366) * 29**

**Depreciated Value = (2000 / 366) * 29**

**Depreciated Value = 5.464 * 29 = 158.45**

**The current value of the asset = 9830.6 - 158.45 = $9672.13**

The asset’s value at the end of **March 2020** will be:

**Depreciated Value = ((10000 * 0.20) / 366) * 31**

**Depreciated Value = (2000 / 366) * 31**

**Depreciated Value = 5.464 * 31 = 169.38**

The current value of the asset at the end of the fiscal year = **$9502.73**

The asset’s value at the end of **April 2020** will be:

**Depreciated Value = ((9502.73 * 0.20) / 366) * 30**

**Depreciated Value = (1900.55 / 366) * 30**

**Depreciated Value = 5.192 * 30 = 155.78**

The **current value of the asset = 9502.73 - 155.78 = $9346.95**

When you keep depreciating the asset this way, the current value of the asset at the end of January 2021 will become 0 or reaches its salvage value, which means that the asset’s useful life is complete or the asset is completely depreciated.