Q.A machine costing ₹30000 is expected to have a useful life of 13 years and a final scrap value of ₹4000. Find the annual depreciation charge using the straight line method.
Straight Line Depreciation spreads the loss in value evenly over the asset’s life. The annual charge is the cost minus scrap value divided by the useful life: ₹2000 per year.
Why straight line depreciation makes sense
When a company buys a machine, it doesn’t treat the entire cost as an expense in the year of purchase. Instead, the cost is spread over the years the machine will actually help generate revenue. The straight line method is the simplest: it assumes the machine loses the same amount of value every year. The total loss over its life is just the purchase price minus whatever you can sell it for at the end (the scrap value). Divide that total loss by the number of years, and you get the annual depreciation charge.
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Identify the given values
Cost of the machine = ₹30,000
Scrap value (what it’s worth at the end) = ₹4,000
Useful life = 13 years
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Find the total depreciable amount
This is the cost that will be “used up” over the machine’s life.
- Divide by the useful life Each year bears an equal share of that ₹26,000.
A common mistake is to forget to subtract the scrap value. If you simply divided ₹30,000 by 13, you’d get ₹2308 — which overstates the depreciation and would understate the machine’s book value at the end. The scrap value is real money you get back, so it should not be depreciated.
You can think of it this way: the machine’s value drops from ₹30,000 to ₹4,000 over 13 years — a total drop of ₹26,000. That’s exactly ₹2000 per year. After 13 years, the accumulated depreciation will be ₹26,000, leaving a book value of ₹4,000, matching the scrap value.
The annual depreciation charge is ₹2000.
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