Accumulated Depreciation Calculator
What is Accumulated Depreciation?
Accumulated depreciation refers to the total depreciation amount of a fixed asset from the time it was put into operation by a company. This depreciation represents the cost of the asset that has been utilized over time. In essence, accumulated depreciation is a reflection of the wear and tear of a fixed asset throughout its operational life.
Fixed assets like vehicles, machinery, and buildings have a lifespan, they are expected to provide services over an extended period. Over this life span, as they are used and wear down, their value depreciates, and the total of these depreciations is accumulated and represented as the 'Accumulated Depreciation'.
How to Use an Accumulated Depreciation Calculator
Using an Accumulated Depreciation Calculator is straightforward. Be aware that there are different methods used to calculate it. Here's a general idea of how to use the calculator:
Select the depreciation method to use: You will find various options, such as the straight-line method, the declining balance method, the sum of the year's digits method, and the units of production method.
Input the required variables: These may vary depending on the depreciation method but generally include the cost of the asset, its salvage value (the estimated value of the asset at the end of its useful life), the lifespan of the asset, and the number of years or units produced (for the units of production method).
After inputting all the details, the calculator will output the accumulated depreciation for the chosen time period.
Example to Demonstrate the Calculator
Let's take an example using the straight-line method. Suppose a company bought a machine for $25,000. The machine has an estimated life-span of 15 years, a salvage value of $3,000, and we are looking to calculate the accumulated depreciation after 3 years. Here's how to calculate it:
Subtract the salvage value from the cost of the asset: $25,000 - $3,000 = $22,000
Divide this value by the life of the asset: $22,000 / 15 = $1,466.667
Multiply the answer by the number of years: $1,466.667 * 3 = $4,400
So, the accumulated depreciation of the machine after three years is $4,400. The book value of the asset after three years would be the initial cost minus the accumulated depreciation: $25,000 - $4,400 = $20,600