doesn t factor in accelerated loss of asset value
example of straight line basishere s a hypothetical example to show how the straight line basis works let s assume that company a buys a piece of equipment for 10 500 the equipment has an expected life of 10 years and a salvage value of 500 to calculate straight line depreciation the accountant divides the difference between the salvage value and the equipment cost also referred to as the depreciable base or asset cost by the expected life of the equipment using the formula from above to calculate the asset s depreciation the straight line depreciation for this piece of equipment is notice when graphed the result is a straight line the company can now expense 1 000 annually to account for the equipment s declining value this 1 000 is expensed to a contra account called accumulated depreciation until 500 is left on the books as the value of the equipment 