What is Straight-Line Depreciation?

Straight-Line Depreciation is the simplest and most common method of calculating depreciation. It spreads the cost of a tangible asset evenly over its useful life. This method assumes that the asset's value declines at a constant rate over time.

For Startups: This is the default depreciation method for most startups due to its simplicity. It is used for assets like computers, office furniture, and vehicles. By expensing a portion of the asset's cost each year, the startup accurately reflects the asset's diminishing value on its books.

Calculation: Annual Depreciation Expense = (Cost of Asset - Salvage Value) / Useful Life of Asset.

Example: A startup buys office furniture for ₹5 Lakhs with an estimated useful life of 5 years and no salvage value. Using the straight-line method, the annual depreciation expense would be ₹1 Lakh for the next 5 years.