Depreciation calculator

How to use the calculator

Enter the cost, the expected residual value and the purchase date, then choose straight line with a useful life or reducing balance with an annual rate. The result shows the charge, net book value and journal for any financial year in the schedule.

The example starts with sensible defaults: a monthly charge, a March year end and a full month’s depreciation in the month of purchase, with none in the month of disposal. The alternatives are pro-rata by day, or no charge until the month after purchase. Whichever you choose, apply it to every asset.

Each month is rounded so the running total stays exact, so £333.33 a month shows as £333.34 in some months. Financial years add up to the annual figure, and the last period ends at the residual value.

Straight line depreciation

Annual charge = (cost − residual value) ÷ useful life in years. The charge is the same every full year, which suits assets that give steady use over their life, such as furniture, fittings and buildings.

For example, a company with a 31 March year end buys a delivery van for £24,000 on 15 June 2026. It expects to use the van for five years and sell it for £4,000. The annual charge is £20,000 ÷ 5 = £4,000, or £333.33 a month. With a full month in the month of purchase, the first year covers June to March, ten months, so the charge to 31 March 2027 is £3,333.33.

Reducing balance depreciation

Annual charge = net book value at the start of the year × rate. Because each charge is a percentage of what is left, the charge is highest in the first year and falls after that. It suits assets that lose most of their value early, such as vehicles, machinery and computers.

For example, a business with a 31 December year end buys a packing machine for £10,000 on 1 January 2026 and depreciates it at 25% a year. The charge is £2,500 in 2026, leaving £7,500. In 2027 it is 25% of £7,500, which is £1,875, and in 2028 it is £1,406.25, leaving a net book value of £4,218.75 after three years. In a part year, the calculator charges the rate for the months held.

Reducing balance never reaches zero, so the remaining value stays on the register until the asset is sold or scrapped. To write an asset down to its residual value over a set life, use a rate of 1 − (residual value ÷ cost)^{1 ÷ years}. Taking £10,000 down to £1,000 over five years needs a rate of about 36.9%.

Choosing a useful life and residual value

The useful life is how long your business expects to use the asset, which can be shorter than its physical life if you replace things early. The residual value is what you expect to get for it at the end of that time, after selling costs. Base both on your own experience, such as how often you replace laptops or what similar vans fetch at auction. Under FRS 102, review them when something suggests they have changed, and depreciate the remaining net book value over the revised life from then on.

As a starting point, many small businesses depreciate computers over three years, vehicles over four or five and furniture or machinery over five to ten. These are examples, not rules. The right figure is the one that matches how your business uses the asset, applied consistently to similar assets.

What a fixed asset register holds

A fixed asset register lists every asset the business owns, so the cost and accumulated depreciation on the balance sheet can be traced to individual items. A simple fixed asset register template has these columns:

• Identity: description, serial number or tag, location or user, and the supplier and invoice reference.
• Accounting: category and asset account, date acquired, cost, residual value, and the method with its useful life or rate.
• Each year: accumulated depreciation brought forward, the charge for the year, accumulated depreciation carried forward and net book value.
• On disposal: the date, proceeds and the gain or loss.

The CSV from this calculator gives one register line in that layout, followed by the schedule. Paste lines for several assets together and the totals should agree with the fixed asset accounts in your trial balance at each year end. For the whole list, our free fixed asset register template in Excel works out every asset’s charge for the year with the same rules.

Setting a capitalisation threshold

A capitalisation threshold is the cost below which the business treats an item as an expense instead of adding it to the register. No accounting standard sets the figure; it is a company policy based on what is material to your accounts. A business might choose £500, so a £120 desk chair is expensed while a £1,800 laptop is capitalised. Write the threshold down, apply it to every purchase and decide how to treat items bought together, such as ten laptops for a new team.

Disposals: gain or loss

When an asset is sold or scrapped, compare the proceeds with its net book value on that date. If the van above is sold on 20 September 2028 for £16,000, it has been depreciated for 27 months, or £9,000, leaving a net book value of £15,000. The £1,000 difference is a gain on disposal. The journal removes the cost and accumulated depreciation: debit accumulated depreciation £9,000 and bank £16,000, credit the van’s cost £24,000 and the gain £1,000.

Depreciation in the month-end close

Posting depreciation each month keeps the profit and loss accurate during the year, as the accruals concept requires: the cost of an asset is matched to the periods that benefit from it. It is one of the adjustments that make management accounts reliable, alongside spreading prepaid costs and accruing unbilled ones with the prepayments and accruals calculator. To see how this works in your books, read how Briefcase handles fixed assets and depreciation.