when you purchase an asset for your business it has a market value as that asset ages or is used it loses some of that value this is called depreciation the opposite of appreciation which is an increase in value 
businesses can expense this value reduction over the item s lifetime some assets which accumulate depreciation are the figure for accumulated depreciation can be located on a company s balance sheet below the line for related capitalized assets investopedia mira norianmethods to calculate accumulated depreciationthere are six accepted methods for calculating depreciation that are allowable under generally accepted accounting principles gaap a company may select from the following the most common method is the straight line method of accounting a company deducts the asset s salvage value from the purchase price to find a depreciable base then this base is accumulated evenly over the anticipated useful life of the asset the straight line method formula is imagine that company abc buys a building for 250 000 the building is expected to be useful for 20 years with a value of 10 000 at the end of the 20th year the depreciable base for the building is 250 000 10 000 240 000 divided over 20 years the company would recognize 12 000 in accumulated depreciation annually with the declining balance method depreciation is recorded as a percentage of the asset s current book value because the same percentage is used every year while the current book value decreases the amount of depreciation decreases each year even though the total accumulated depreciation will increase the amount of accumulated depreciation per year will decrease let s say that company abc buys a company vehicle for 10 000 with no salvage value at the end of its life the company decided it would depreciate 20 of the book value each year here s how that calculation would look 