Meaning of straight line depreciation
Straight line depreciation
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Business glossary
Meaning of term straight line depreciation :
The straight line method of calculating depreciation is perhaps the simplest (and most common) method to work out how much depreciation to charge against and asset each year. It involves subtracting the residual (or scrap value) of the asset from its cost and then dividing the result by the number of years of useful life that the asset is likely to give. For example, if a machine cost £100,000 and is likely to have a residual value of £20,000 after giving a useful life of ten years, then according to the straight line method of calculating depreciation, the depreciation charge will be £8,000 per year (£100,000 - £20,000 = £80,000 which over 10 years is equal to £8,000 per year).
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Straight line depreciation
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