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How To Calculate Depreciation In Excel Using Straight Line

Wednesday, October 1st 2025. | Excel Templates

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Calculating Straight-Line Depreciation in Excel

Depreciation is a crucial accounting concept that allocates the cost of a tangible asset over its useful life. It reflects the gradual decline in the asset’s value due to wear and tear, obsolescence, or other factors. The straight-line depreciation method is one of the simplest and most widely used approaches for calculating depreciation. It distributes the asset’s cost evenly over its useful life, resulting in a consistent depreciation expense each period.

Excel offers a straightforward way to calculate straight-line depreciation using the SLN function. This function simplifies the process and provides accurate results. This guide will walk you through the steps, formulas, and best practices for using the SLN function in Excel to determine straight-line depreciation.

Understanding the Key Components

Before diving into the Excel formula, it’s essential to understand the components involved in calculating straight-line depreciation:

Cost: The original purchase price of the asset, including any costs incurred to get the asset ready for its intended use (e.g., shipping, installation).
Salvage Value: The estimated value of the asset at the end of its useful life. It represents the amount the company expects to receive when disposing of the asset.
Life: The estimated number of years the asset will be used in the business.

The SLN Function in Excel

Excel’s SLN function is designed specifically for calculating straight-line depreciation. The syntax of the function is:

=SLN(cost, salvage, life)

Where:

cost is the initial cost of the asset.
salvage is the salvage value of the asset.
life is the useful life of the asset in years.

Step-by-Step Guide to Using the SLN Function

Open Excel and Create a Spreadsheet: Start by opening a new Excel workbook and creating a spreadsheet to organize your depreciation data. Include columns for:
- Asset Name
- Cost
- Salvage Value
- Useful Life
- Annual Depreciation
Enter Asset Information: Populate the spreadsheet with the relevant information for each asset you want to depreciate. For example:

Asset Name Cost Salvage Value Useful Life Annual Depreciation

Machinery A $50,000 $5,000 10 years

Equipment B $25,000 $2,500 5 years
Apply the SLN Function: In the “Annual Depreciation” column, enter the SLN function to calculate the depreciation expense for each asset. For Machinery A, assuming the cost is in cell B2, salvage value in C2, and useful life in D2, the formula in cell E2 would be:
```
=SLN(B2, C2, D2)
```
Repeat this process for Equipment B, adjusting the cell references accordingly (e.g., =SLN(B3, C3, D3)).
Interpret the Results: Excel will automatically calculate the annual depreciation expense for each asset and display it in the “Annual Depreciation” column. The result represents the amount of depreciation that will be recorded each year over the asset’s useful life. In the example above, Machinery A would have an annual depreciation of $4,500, and Equipment B would have an annual depreciation of $4,500. ($50,000 – $5,000) / 10 = $4,500 ($25,000 – $2,500) / 5 = $4,500

Asset Name	Cost	Salvage Value	Useful Life	Annual Depreciation
Machinery A	$50,000	$5,000	10 years
Equipment B	$25,000	$2,500	5 years

Example Scenarios

Let’s consider a few practical scenarios to illustrate how the SLN function works:

Scenario 1: Office Furniture
- Cost: $10,000
- Salvage Value: $1,000
- Useful Life: 7 years
- Excel Formula: =SLN(10000, 1000, 7)
- Annual Depreciation: $1,285.71
Scenario 2: Delivery Vehicle
- Cost: $30,000
- Salvage Value: $3,000
- Useful Life: 5 years
- Excel Formula: =SLN(30000, 3000, 5)
- Annual Depreciation: $5,400

Important Considerations

Consistency: Once you choose the straight-line depreciation method, it’s essential to apply it consistently for all similar assets within your business.
Accuracy of Estimates: The accuracy of your depreciation calculations depends heavily on the accuracy of your estimates for salvage value and useful life. Regularly review and update these estimates as needed.
Book Value: Keep track of the book value of your assets (Cost – Accumulated Depreciation). The book value should never be less than the salvage value.
Other Depreciation Methods: While straight-line is simple, other methods (e.g., double-declining balance, sum-of-the-years’ digits) may be more appropriate for assets that depreciate more rapidly in their early years. Excel offers functions for these methods as well (DDB and SYD).
Accounting Standards: Be sure to comply with all relevant accounting standards and regulations regarding depreciation.

Conclusion

The SLN function in Excel provides a convenient and accurate way to calculate straight-line depreciation. By understanding the underlying principles of depreciation and utilizing Excel’s built-in functionality, you can effectively manage your company’s assets and ensure accurate financial reporting. Remember to carefully consider the factors discussed and adjust your calculations as necessary to reflect the specific circumstances of your assets.

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