Straight-line Method Example
Vision Configuration includes the calculations and setup for 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. This occurs 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. 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 |
Vision uses the following information to calculate straight-line depreciation:
| Description | Location |
|---|---|
| Depreciation Basis | |
| In Service Date | |
| 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. |
| Asset Period per year | |
| Averaging Convention | Full month |
| Depreciation Method | This defines the percentage per year to depreciate the asset. Straight-line is defined as even across the useful life. |
| 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 |
Vision sets up straight-line depreciation by completing the following steps:
| Step | Description |
|---|---|
| 1 | Pull the depreciation basis from the Cost tab of the Equipment Info Center. |
| 2 | Calculate the total useful life periods. |
| 3 | Count the in service periods. |
| 4 | Calculate the current cumulative depreciation as follows:
(depreciation basis) * (in service period/total periods) |
| 5 | Calculate the 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 Info Center. |