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Straight-line Depreciation: Definition and Meaning
Definition
Straight-line depreciation is a depreciation method that records an equal amount of depreciation expense during each period of an asset’s useful life.
Why It Matters
This method is commonly used when an asset is expected to provide benefits relatively evenly over time. It is straightforward to calculate and can make period-to-period expense more consistent.
The appropriate method and useful life depend on the nature of the asset, how it is used, financial-reporting requirements, and tax rules. Tax depreciation may use different methods or lives from book depreciation.
Example
A $10,000 asset with a five-year useful life and no residual value may record $2,000 of straight-line depreciation expense per year.
Related Terms
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