Spreading an asset's cost over its life
When your business buys something durable — a vehicle, machine, laptop or fit-out — you do not record the whole cost as an expense in one go. Instead you spread it across the years the asset is useful, a process called depreciation. It matches the cost of the asset to the periods that benefit from it, keeps your profit from swinging wildly in the year of purchase, and is required for accurate accounts and tax. This calculator uses the most common method, straight-line depreciation.
Straight-line spreads the cost evenly. You enter the asset's purchase cost, its estimated salvage value (what it will be worth at the end of its useful life) and that useful life in years. The annual depreciation is simply the cost minus salvage, divided by the number of years. The tool also shows the monthly charge and the book value — the asset's remaining value on your books — declining year by year until it reaches the salvage value.
For example, a 24,000 machine expected to be worth 4,000 after five years depreciates by (24,000 − 4,000) ÷ 5 = 4,000 a year, or about 333 a month, and its book value falls in a straight line to 4,000. Knowing this helps you budget for replacement, understand the real cost of using an asset, and record the depreciation expense correctly each period.
Straight-line is the simplest method, but some assets or tax regimes use accelerated methods, and tax depreciation rules can differ from accounting depreciation — check what applies to you. Tallium tracks your fixed assets and posts depreciation automatically each period, so your profit, book values and tax stay accurate without manual journals.
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