Straight-line Method Example

The Asset Management application comes set up to calculate the straight-line method of depreciation. Use this method to calculate depreciation based on the cost of the asset being reduced by an equal amount in each accounting period over the asset's useful life.

Straight-line depreciation is frequently used when the asset's usability remains static regardless of its age.

For example, if an asset's value is $20,000.00, the useful life is 4 years, and the expected value at the end is $5000, the depreciation is $3,750 per year. This is calculated as follows:

Criteria	Calculation
Asset's value	$20,000
Useful life	4 years
Expected value at end of cycle	$5,000
Depreciable amount = $15,000	$20,000 - $5,000
Yearly depreciation = $3750	$15,000 / 4

Deltek uses the following information to calculate straight-line depreciation:

Description	Location in Deltek
Depreciation Basis	GL Cost tab of Hubs > Equipment
In Service Date	GL Book tab of Hubs > Equipment
In Service Period	Calculated from the in service date
In Service total periods	Number of periods between the current period and the in service period
Useful life in years	Comes from the assigned asset class (default) or the edited value. GL Book tab of Hubs > Equipment
Asset Period per Year	General tab of Settings > Accounting > Asset Management
Averaging Convention	Full month
Depreciation Method	The method defines the percentage per year to depreciate the asset. Straight-line is defined as even across the useful life. GL Book tab of Hubs > Equipment
Previous Accumulated Depreciation	Amount accumulated to date
Current Accumulated Depreciation	Amount accumulated to date
Period Depreciation	Amount depreciated for asset
Catch-up Posting	Current period

This is how Deltek performs straight-line depreciation:

Step	Description
1	Take the depreciation basis from the GL Cost tab of the Equipment hub.
2	Calculate the total number of useful life periods.
3	Calculate the total number of in service periods.
4	Calculate the current cumulative depreciation as follows: (depreciation basis) * (in service period/total periods)
5	Calculate the current period depreciation as follows: Current Cumulative Depreciation - Previous Cumulative Depreciation
6	Copy the current accumulated depreciation amount to the previous accumulated depreciation amount.
7	Add this amount to the Depreciation tab of the Equipment hub.