Accumulated Depreciation Calculator

Created by Adena Benn
Reviewed by Tibor Pál, PhD candidate and Steven Wooding
Based on research by
How Are Accumulated Depreciation and Depreciation Expense Related? Investopedia (April 9, 2022)
Last updated: Dec 20, 2022

Are you an accountant looking to calculate the accumulated depreciated value of the company's vehicle? Or is it the machine used to manufacture the toys that you wish to find the total depreciated value of? This calculator will help you find the total depreciated value in real-time.

For those who may be new to the field of accounting and finance, we will also cover:

  • What accumulated depreciation is;
  • How to use our accumulated depreciation calculator;
  • Four different accumulated depreciation formulas; and
  • How to calculate the accumulated depreciation using:
    • The straight-line method;
    • The declining balance method;
    • The sum of the year's digits method; and
    • The units of production method.

What is accumulated depreciation exactly?

Businesses have fixed assets that continue to be useful for many years. We capitalize such assets to match the expense of the asset to the total period it proves economically beneficial to the company. Accumulated depreciation refers to the total expense affixed to a fixed asset from the date it was put to use.

For instance, a taxi company may buy a new car for $10,000; however, at the end of year one, that car continues to be useful. The useful life of that car is also one year less than it was at the time of purchase.

In years two and three, the car continues to be useful and generates revenue for the company. Capitalizing this item reflects the initial expense as depreciation over the asset's useful life. In this way, this expense is reflected in smaller portions throughout the useful life of the car and weighed against the revenue it generates in each accounting period.

When we find the total of the depreciated expense of the asset after each year, the answer we arrive at is what is the accumulated depreciation of the asset.

If you are interested in learning more about depreciation, be sure to visit our depreciation calculator. Additionally, if you are interested in learning what revenue is and how to calculate it, visit our revenue calculator.

How to calculate the accumulated depreciation

To calculate the accumulated depreciation, we can use any of the following methods:

  • Straight line;
  • Declining balance;
  • Sum of the year's digits; or
  • Units of production.

To demonstrate each of these methods, we will use the problem below:

🙋 Let's say Company X bought a toy-producing machine for $25,000. The estimated life of the machine is 15 years, and its salvage value is $3,000. The depreciation rate is 10%.

Here is how to calculate the accumulated depreciation using each of the methods mentioned above.

How to calculate the accumulated depreciation – the straight-line method

accumulated depreciation = ((cost of the asset - salvage value)/life of the asset) × number of years.

Let's assume that, in this instance, we wish to calculate the accumulated depreciation after 3 years.

Here is how to calculate the accumulated depreciation – straight-line method:

  1. Subtract the salvage value from the cost of the asset:
    25,000 - 3000 = 22,000.

  2. Divide the value in 1 by the life of the asset:
    22,000 / 15 = 1,466.667.

  3. Multiply the answer in 2 by the number of years:
    1466.667 × 3 = $4,400.00.

So the accumulated depreciated value of the truck after three years is $4,400.00.

The original cost of an asset minus its accumulated depreciation is the current book value of the asset. This means that after three years, the book value of the toy-producing machine is:
25,000 - 4,400.00 = $20,600.

The declining balance method

The formula for the declining balance method of accumulated depreciation (AD) is:

AD = (current book value × depreciation rate) + sum of the previous years' depreciation.

So using the problem statement above, the calculation for the depreciation expense for the first year would look like this:

D = 25000 × 10% = 25000 × 0.1.
D = $2500.

For the second year, the book value would now be:
25000 - 2500 = $22,500.

So, in the second year, the depreciation expense would be calculated on this new (present) book value of $22,500.

So the depreciation expense in year 2 would be:
22,500 × 10% = $2,250.

Now, after 2 years, the accumulated depreciation would be the sum of the depreciation expense from years 1 and 2:
2,500 + 2,250 = 4,750.

The sum of the year's digits method

The formula for calculating the accumulated depreciation using the sum of the year's digits method is:

(remaining life span/SYS × (cost of the asset - salvage value)) + sum of the previous years' depreciation,

where SYS is the sum of the year's digits.

So since the life of the toy-producing machine above is 15 years, we will add together the digits representing the number of years of the life of the assets.

SYS = 1 + 2 + 3 + 4 + 5 + 6 + 7 + 8 + 9 + 10 + 11 + 12 + 13 + 14 + 15
SYS = 120

So substituting the given values into the formula plus the calculated SYS, for the first year, we have a depreciated expense (DE):

DE = 15/120 × (25,000 - 3,000)
= 15/120 × 22,000
= $2,750.

In year 2, the depreciated expense will look like this:
DE = 14/120 × (25,000 - 3,000)
= $2,566.67.

So to find the accumulated depreciation AD, we need to sum the total depreciation expense from each year.

AD = 2,750 + 2,566.67
= $5316.67.

The units of production method

When we calculate the accumulated depreciation using the units of production method, we use the following formula:

DE = (asset cost - salvage value)/estimated units over lifespan × actual units produced

Let's assume that the expected number of units the toy machine can produce over its life span is 75000. In year 1, it made 700 units, and in year 2, it produced 10,000 units.

So for company X, our depreciation expense in year 1 would be:

DE =(25,000 - 3000)/75,000 × 700
= 205.33

In year 2, the depreciation expense would be:

DE = (25000 - 3000)/75000 × 10,000
= 24,600

So to find the accumulated depreciation after two years, we add the depreciation expense from years 1 and 2 = 24,805.33.

How to use our accumulated depreciation calculator

Our accumulated depreciation calculator is pretty straightforward to use.

  1. Choose the accumulated depreciation method you require.
  2. Enter the values for the chosen method.
  3. The accumulated depreciation for the time period will be displayed.

Are you interested in other calculators like this one? Check out our business budget and financial leverage ratio calculators.

🙋 Current book value refers to the net value of an asset at the start of the accounting period.

FAQ

What type of assets do we calculate accumulated depreciation for?

We calculate accumulated depreciation on fixed assets that outgrow their usefulness over time. Some assets to which accumulated depreciation may apply are:

  • Vehicles;
  • Machinery;
  • Tools; and
  • Buildings.

Does accumulated depreciation apply to land?

No. Although land is a fixed asset, accumulated depreciation does not apply to it. This is because land is an asset that does not outgrow its usefulness over time.

How to calculate the accumulated depreciation on a building after 5 years?

Assuming that the building costs $700,000 (do not include the cost of the land) and has an estimated life of 40 years and a salvage value of $280,000. The accumulated depreciation (straight line method) would be: $52,500

Here is how we calculate it:

  1. Applying the accumulated depreciation formula:

    accumulated depreciation = ((cost of the asset - salvage value)/life of the asset) × number of years.

  2. Substitute in the values given:
    accumulated depreciation = ((700,000 - 280,000)/40) × 5.

  3. Solve:
    accumulated depreciation = $52,500.

How do I find the current book value of an asset?

An asset's book value is the asset's original cost minus the accumulated depreciation.

For instance, if we know that a building costs $700,000 when new and at the end of seven years, the accumulated depreciation is $73,500, the book value would be 700,000 - 73,500, leaving a book value of $626,500.

What is the current book value if the accumulated depreciation is $14,000?

Assuming that the asset's cost price is $20,000, the current book value would be $6,000.

To find the current book value, we use the formula:

Book value = Cost of asset - Accumulated depreciation.

Book value = 20,000 - 14,000 = 6,000.

Adena Benn
Accumulated depriciation method
Straight line
Cost of the asset
$
Life of the asset or useful life
yrs
Number of years
yrs
Salvage value
$
Accumulated depreciation
$
Net book value
$
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