How this instrument works
Accumulated depreciation is a running total, not one year's charge: it is every dollar of depreciation expense an asset has recorded from the day it entered service up to today. On a balance sheet it sits as a contra-asset, subtracted from the asset's original cost to leave net book value, the figure that actually shows up in total assets. Where a straight-line depreciation schedule tells you what one year costs, this instrument answers the separate question of how much has piled up so far.
The running total cannot grow without limit. Once years in service reaches useful life, the total hits the depreciable base — cost minus salvage — and stops there; the asset is called fully depreciated but keeps its salvage value on the books until it is sold, scrapped or replaced. That ceiling is why the formula takes the smaller of the age-based total and the depreciable base, rather than just multiplying the annual charge by age with no limit at all.
This straight-line version assumes even wear and a fixed life estimate, a bookkeeping convention rather than a measurement of physical condition. It says nothing about resale value, does not adjust mid-course for a revised life or salvage figure, and ignores accelerated methods such as declining balance or MACRS that many tax returns actually use. Treat the result as the book figure a set of accounts would carry, not an appraisal of what the asset is worth today.
- Enter Original cost, $ — the full amount paid, including freight and setup, to put the asset into service.
- Set Salvage value, $ to what you expect to recover at retirement, and Useful life, years to how long you expect to run it.
- Move Years in service to how many full years the asset has actually been used, which can be less than or equal to its useful life.
- Read Annual straight-line depreciation for one year's charge, then Accumulated depreciation to date for the running total, capped once the asset is fully written down.
Worked example — a $50,000 delivery van, fully written down
A courier firm buys a delivery van for $50,000 and expects a scrap dealer to pay $5,000 for it after nine years of daily routes. Enter cost 50000, salvage 5000, life 9. The depreciable base is $45,000, so straight-line arithmetic splits that evenly across nine years for an Annual straight-line depreciation of $5,000.
Set Years in service to 9, matching the van's full useful life, and Accumulated depreciation to date reads $45,000 — the entire depreciable base, recorded in full. Net book value, found by subtracting accumulated depreciation from cost, is now $50,000 minus $45,000, exactly the $5,000 salvage figure entered at the start. Push the age past 9 and the total holds at $45,000 rather than climbing further, because the van cannot depreciate below what it is expected to be worth at retirement.
Questions
What is the difference between accumulated and annual depreciation?
Annual depreciation is a single year's expense; accumulated depreciation is the running sum of every year's expense charged since the asset entered service. Divide accumulated by annual, while age stays within useful life, and you get back roughly the number of years in service — the two figures describe the same schedule at different scales, one slice and the total sliced so far.
Why does the running total stop growing after useful life ends?
Because the depreciable base, cost minus salvage, is the most an asset can lose under straight-line rules. Once years in service reaches useful life, the total equals that base and holds there; pushing age further doesn't add more, it just confirms the asset is fully depreciated and still carries its salvage value on the books.
How do I get net book value from this figure?
Subtract accumulated depreciation from original cost. In the worked example, a $50,000 van with $45,000 accumulated depreciation carries a net book value of $5,000, which at full useful life equals the salvage figure entered. Net book value is a bookkeeping balance carried on the accounts, not what a buyer would actually pay for the asset today.
Why doesn't my figure match the company's own depreciation schedule?
Most fixed-asset registers apply MACRS or a declining-balance method for tax purposes, which front-load the expense, so their accumulated total grows faster in early years than this straight-line version shows. Differences also appear if the estimated life or salvage value was revised partway through service, or if the current year hasn't been closed in the books yet.
What happens to accumulated depreciation when an asset is sold?
It is removed from the books together with the asset's original cost, and any gap between the sale price and net book value is recorded as a gain or loss on disposal. This calculator only tracks the running total while an asset stays in service; it does not model a sale or the tax treatment of a resulting gain or loss.
Can accumulated depreciation exceed the original cost?
No. It is capped at the depreciable base, cost minus salvage, so it can approach but never reach full original cost unless salvage is set to zero. If a company's own ledger shows a larger figure, check whether a later capital improvement raised the asset's cost basis without a matching update to the depreciation schedule.
References
- IRS Publication 946 — How To Depreciate Property
- IRS — About Form 4562, Depreciation and Amortization
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.