Depreciation is the accounting method used to spread the expense of purchasing a fixed asset over the time it is used. As GAAP and IFRS try to follow the matching principle, depreciation matches the expense of an asset to the same time period during which the asset is providing revenues. If a tangible asset is expected to provide value to an organization for more than one accounting period, then it should be capitalized and expensed over that period of time using a depreciation method.

Straight Line

As a practical expedient, book (not tax) depreciation is typically calculated on the straight line basis. This involves a relatively simple calculation which outputs an expense amount for each period which can be days, months, quarters, etc.

If you had a company policy of computer equipment having a useful life of three years, the calculation would be to divide the acquisition cost by 36 months and multiply the result by the number of months in the period.

Accelerated methods

Some fixed assets may lose their value at a faster rate in the beginning of their life and a slower rate towards the end. This pattern can be shown with an accelerated method such as declining balance, double declining balance, or sum of the years digits.

 Live examples in Sheets 

Live versions of the SYD, DDB, and DB functions that you can study and use anywhere you would like. SLN didn't make the cut due to its simplicity. There is also a comparison of the four methods.