Determine the asset’s initial cost
Estimate the asset’s useful life
Estimate the salvage value
Choose a depreciation method
Straight-line depreciation: (Cost – Salvage Value) ÷ Useful Life
Declining balance depreciation: Book Value × Depreciation Rate
Units of production depreciation: (Cost – Salvage Value) ÷ Total Estimated Units × Units Used
Sum-of-the-years’-digits depreciation: Depreciable Cost × Fraction Based on Remaining Life
Subtract accumulated depreciation from the original cost to find book value
Use the applicable accounting or tax rules for the asset type
Record depreciation for each accounting period
Review estimates periodically and adjust if needed