S TRAIGHT L INE

METHOD
GROUP 4
1. T O T O K N U R T Y A S N O ( 1 8 8 0 9 1 3 4 0 6 6 )
2. M U H A M M A D R Y A N P (18809134070)
3. S I T I H A S N A F . ( 1 8 8 0 9 1 3 4 0 5 4 )
4.
5.
DEPRECIATION METHOD

• Depreciation expense is used in accounting to allocate the cost of a fixed

assets over it’s useful life.
• Fixed asset is a company’s tangible asset to product goods for long term
period.
• Such as:
 Double
Sum of
Declinin
Years
g
Digits
Balance
Units of
Straight
Producti
Line
Depreciati on
on Method
STRAIGHT LINE METHOD

• A default method used gradually reduce the

carrying amount of a fixed assets over it is
useful life.
• In straight line depreciation, the expense
amount same in every period (usually 1 year).
• SLN function
CALCULATION STEP
• Determine the initial cost of the asset that has been
recognized as a fixed asset.
• Subtract the estimated salvage value of the asset from the
amount at which it is recorded on the books.
• Determine the estimated useful life of the asset. It is easiest
to use a standard useful life for each class of assets.
• Divided the estimated useful life (in years) into 1 (one) to
arrive at the straight-line depreciation rate.
• Multiply the depreciation by the asset cost (less salvage
value).
FORMULA

•   = Annual Depreciation Expense

• Cost = Costs incurred to buy assets include the purchase price plus other
costs to obtain the asset
• Salvage value/residual value = Value of the remaining assets at the end of
its useful life
• Useful Life = Useful time of the asset (different according to the type of
fixed assets, for example: the useful life of electronic goods such as laptops
is four years)
EXAMPLE
• Company purchase a machine for $100000 with an
estimated salvage value of $20000 an useful life of 5 years.
• The Straight-line depreciation for the machine would be
calculated as follows:

2. Cost of the
asset-estimated
1. Cost of the salvage value= 3. Useful life of the
asset: $100000 $100000-$20000= asset 5 years
$80000 total
depreciable

5. Therefore,
4. Divide step 2 &
company would
3: $80000:5
depreciate the
years= $16000
machine at the
annual
amount of $16000
depreciation
annualy for 5
amount
years
ADVANTAGES

• Advantages of straight line depreciation method

- Simplest depreciation method to compute
- Can be applied to all long-term assets
- The same for each period of assets’ service life
- Widely acceptable and usable accounting method
WEAKNESS

• Weakness of straight line depreciation method

- Does not reflect accurately the difference in usage of an asset from one
period to the other
- Does not necessary match costs with revenues in different types of long-
term assets
- Might not be appropriate for some depreciable assets due to rapidly
developing technology, such as computers
WHY STRAIGHT LINE IN A COMPANY

• The cost can’t influenced by unefficient

• The depreciation cost was easy to calculate
• Economic function from asset decrease proporsional every period
• Easy for an accountant/administrator to calculate manually, or through
accounting program.
SOURCE
TQ