What is the formula to solve for straight-line depreciation?

The formula for straight-line depreciation is calculated by taking the total cost of the asset and dividing it by its useful life, often referred to as its class life. This method evenly allocates the cost of the asset over its useful life, which simplifies accounting and provides a clear understanding of the depreciation expense incurred in each accounting period.

By using the total cost of the asset and dividing it by the total number of years it is expected to provide value (its class life), businesses can ensure that they are reflecting the gradual wearing out of the asset accurately in their financial statements. This method aligns with the matching principle in accounting, where expenses are recognized in the same period as the related revenues they help to generate.

This approach results in a consistent annual depreciation amount, facilitating easier budgeting and forecasting for future expenses, and aiding stakeholders in assessing the company's asset management and performance over time.