Straight line depreciation formula example

The straight-line method of depreciation is the most popular option for transferring the cost of fixed assets and intangible assets to the cost of production. An important component of this method is the calculation formula, there are two of them, and we will analyze each of them using a specific example. And also we will tell you in which cases you can apply the linear method of depreciation.

Since depreciation is one of the cost items, not only in accounting, but also in tax accounting, it is very important not to make a mistake in determining the method of depreciation. There are several of them:

• Way to reduce the balance;
• Fixed assets and intangible assets are written off in proportion to the output;
• Line write-off.

The company itself has the right to choose the method of depreciation, the main thing is that it be prescribed in the accounting policy of the enterprise. You can change the method no more than once every five years.

In this article, we will talk about the most commonly used method - the straight-line method of calculating depreciation of fixed assets and intangible assets.

Linear depreciation method: the essence of the method

The essence of the straight-line depreciation method is that the organization monthly allocates part of the cost of fixed assets and intangible assets to the costs of production and manufacture of products. Linear depreciation is charged on each item of property, plant and equipment.

Important! If the depreciation item consists of several components, then each of them is an independent object subject to depreciation.

All items of fixed assets have their own useful life depending on their belonging to the depreciation group.

Note that items in group 8 through 10 are subject to straight line depreciation only. To determine which group your object belongs to, you need to refer to the reference book “Classification of fixed assets included in depreciation groups”, approved by Government Decree No. 1 of 01/01/2002 (as amended on 04/28/2018).

You can download the guide here:

In addition, the straight-line method of depreciation is required:

• for buildings whose service life is more than twenty years;
• for enterprises whose activities are related to the production and use of hydrocarbons in new offshore fields.

Depreciation of fixed assets occurs on a monthly basis. For fixed assets and intangible assets that have just been purchased or otherwise acquired, the first accrual is made from the 1st day of the month following their commissioning.

Straight-line depreciation: formula

Depreciation is calculated using the straight-line method using two formulas. For each of them below you will find an example.

1. If your service life is set in months, then you can immediately use the formula that brings you to a monthly deduction.

1. If the period is set in years, then it is more expedient to first calculate the depreciation rate for the year, and then divide this amount by 12 to reach the monthly figure.

Depreciation rate = 1 / (life in years) * 100%

To obtain the depreciation charge for the month, the amount obtained according to the above formula is divided by 12 (the number of months in a year).

Calculation of depreciation using the straight-line method example

Consider the straight-line depreciation method using a specific example.

Example 1 Linear depreciation, in which the cost of fixed assets and intangible assets is multiplied by the rate of monthly depreciation.

The Limma LLC company bought a conveyor for its production needs, worth 60,000 rubles, VAT is not included here. In accordance with the Classification approved by Decree of the Government of the Russian Federation of 01.01.2002 No. 1 (as amended on 04.28.2018), the purchase belongs to the first depreciation group, its useful life is from one to two years. The head of "Limma" approved that the conveyor will be operated to the maximum. Thus, we have the following data:

• OS price - 60,000;
• SPI - 24 months;
• The depreciation method is linear.

We use the straight-line depreciation formula:

60 000 * (1/24*100) = 2500

It turned out that the monthly depreciation charge on the conveyor will be in the amount of 2520 rubles.

Example 2 Linear depreciation calculated by dividing the cost of fixed assets and intangible assets by the standard service life. We will take the data for calculation from the previous example, and we will determine the life of the conveyor at 2 years.

Depreciation = 60 000 * NA ( depreciation rate)

Na \u003d (1: 2) * 100% \u003d 50%

Accordingly, the annual depreciation will be: 60,000 * 50 / 100 = 30,000;

The monthly accrual is 30,000/12 = 2500 rubles.