Depreciation and finance

Straight-line depreciation, explained and calculated

In short

Straight-line depreciation spreads the depreciable amount, cost minus residual value, evenly across an asset's useful life, so every period takes the same charge. Cohiva Control computes it natively using fixed-precision decimal arithmetic rounded half up, never lets book value fall below the residual value, and posts the monthly journal to Xero, QuickBooks, NetSuite or Crunch.

Worked example: Straight-Line monthly schedule
Asset cost: $42,000.00Residual value: $2,000.00Useful life: 60 months (5 years)
Month Opening book value Depreciation Closing book value
1 $42000.00 $666.67 $41333.33
2 $41333.33 $666.67 $40666.67
3 $40666.67 $666.67 $40000.00
4 $40000.00 $666.67 $39333.33
5 $39333.33 $666.67 $38666.67
6 $38666.67 $666.67 $38000.00
7 $38000.00 $666.67 $37333.33
8 $37333.33 $666.67 $36666.67
9 $36666.67 $666.67 $36000.00
10 $36000.00 $666.67 $35333.33
11 $35333.33 $666.67 $34666.67
12 $34666.67 $666.67 $34000.00

Figures are computed by the same depreciation engine Cohiva Control uses in the product (money as NUMERIC(19,4), rounded ROUND_HALF_UP), shown for the first 12 months of an illustrative asset.

Straight-line depreciation, explained and calculated

Straight-line is the most widely used depreciation method, and for good reason: it is simple to compute, simple to explain and simple to audit. It spreads the depreciable amount evenly across an asset’s useful life, so the charge is the same in every period. This page sets out the formula, walks through a worked example, and shows how Cohiva Control computes it as part of the maintenance system that already holds the asset.

How straight-line works

The depreciable amount is the asset’s cost less its residual value, the amount you expect it to be worth at the end of its useful life. Straight-line divides that amount evenly across the life:

  • Annual charge equals (cost minus residual value) divided by useful life in years.
  • Monthly charge equals the annual charge divided by 12.

Because the charge is constant, the book value falls in a straight line from cost down to residual, which is where the method gets its name. There is no front-loading and no tail; each year, and each month, looks like the last.

A worked example

The calculator above this article uses a standard asset to make the numbers concrete: a cost of 42,000, a residual value of 2,000 and a useful life of 60 months, which is five years. The depreciable amount is 40,000. Divided across 60 months, that is a monthly charge of 666.67, and you can see the same figure repeated down the schedule as book value steps down evenly toward the residual value of 2,000. Those numbers come straight from the product’s depreciation engine, not from a separate marketing calculation, so they match what Cohiva Control would post.

When to use it

Straight-line suits assets that lose value steadily with time rather than usage, such as office fit-out, furniture, signage and most building plant. It is the default many finance teams reach for because it is predictable and easy to defend in an audit. If an asset wears in proportion to use, units of production may fit better; if it loses most of its value early, diminishing value or double declining balance may be more representative.

How Cohiva Control computes it

Cohiva Control runs straight-line through the same engine the product uses internally. Money is held as a fixed-precision decimal and rounded half up, never as a floating point number and never with a naive rounding shortcut, so the cents are correct and consistent. Depreciation never reduces book value below the residual value, so the schedule lands cleanly rather than overshooting in the final period.

Each monthly run writes to an append-only depreciation ledger, which cannot be edited or deleted, and can post a journal to Xero, QuickBooks, NetSuite or Cohiva Crunch. The run is idempotent, so re-running a month does not create a second journal, and posting state is tracked separately from the ledger row so a failed post can be retried without touching the immutable record. Because the asset you depreciate is the same asset your team maintains, there is no separate register to keep in step.

Part of the Cohiva platform

Cohiva Control is part of the Cohiva platform. Leisure operators often run it with Cohiva Complex, and finance teams connect it to Cohiva Crunch for the general ledger. Explore the platform at www.cohiva.app.

This page provides general information about how Cohiva Control calculates depreciation. It is not accounting, tax or financial advice. Confirm treatment with your accountant or adviser.

Frequently asked questions

What is the straight-line depreciation formula?
Annual charge equals cost minus residual value, divided by useful life in years. The monthly charge is that annual figure divided by 12. The same amount is taken every period until book value reaches the residual value.
When should I use straight-line?
Use it for assets that lose value steadily over time, such as fit-out, furniture and most building plant. It is the simplest method to audit and the most common default for accounting depreciation.
How does Cohiva Control calculate it?
It calls the same depreciation engine the product uses internally, holding money as a fixed-precision decimal rounded half up rather than a floating point number, so the worked example on this page matches the product to the cent.
What stops it depreciating below zero?
A book-value floor. Depreciation never reduces book value below the residual value, so the final period takes only what is left down to residual rather than overshooting.
Where do the journals go?
Each monthly run writes to an append-only depreciation ledger and can post a journal to Xero, QuickBooks, NetSuite or Cohiva Crunch. The run is idempotent, so re-running it does not double-post.