Annuity Depreciation Calculator

Annuity depreciation is where an asset loses value by a measurement other than time. For example, a vehicle's value can be depreciated by how many miles it travels, or a machine based on how many operations it performs. The calculator allows you to enter different criteria based on your requirement.

After entering the initial and final values, select the criteria from the drop-down list, this gives relevant choices for the units in the "per" drop-down box. Note - you do not have to enter values, if they are omitted then the usage will still be calculated.

Annuity Depreciation Calculator

Detail	Value	Comments
Asset Value		The value of the asset at the start of the depreciation period
Final Value		The value of the asset at the end of the depreciation period
Usage		Increment
	UnitsMilesKilometresOperationsCycles		UnitsMilesKilometresOperationsCycles

This calculator includes the following algorithms:

Depreciation amount = asset value multiplied by the annual percentage

Balance is the asset value minus the depreciation value

Annuity Depreciation Calculator: Calculating 'Rate of return' on your fixed assets

For all, be it a business or an individual, depreciation is an important factor to evaluate profitability. When you want to know the actual value that your asset, like a car or any other vehicle, has given to you over time, you have to first calculate the depreciation of them. Now the question is what is the Annuity Depreciation Calculation. It is a method to calculate rate of return that is earned by your asset.

This method of calculating depreciation shows you the depreciation value that is caused by something other than time. We can take a car for example; a car, as it depreciates on miles driven. In other words, if an asset is losing its value constantly during its useful life then the method used for measuring this expense is annuity depreciation method.

The annuity depreciation calculator lets you do this calculation quickly. It gives you a chart showing expense of depreciation as usage and value. Using it is quite simple, you are only required to add the following details to know the usage depreciation and value depreciation of the asset.

Asset value - The original value of the asset for which you are calculating depreciation.

Final value - The expected final market value after the useful life of the asset.

Usage -The total expected usage during the entire useful life of the asset.

Increment - Expected annual usage of the asset.

(Note: The correct measure for usage and increment can be selected from the dropdown list while using iCalculator's annuity depreciation calculator)

Steps to be followed to calculate Annuity Depreciation

This method is used to compute constant rate of return on an asset. Below are the steps that should be followed for the calculation.

Future cash flow - This refers to any cash flow that could be associated with the asset in question in any given time during the useful life of the asset. It needs to be estimated to get the exact results.

Internal rate of return (IRR) - The next step will be to calculate the IRR on those estimated future cash flows.

IRR x Initial value - The next step is to multiply the calculated IRR with the initial value of the asset.

Next step is to subtract the result from the cash flow from the current period.

The Value residual is the depreciation expense or compound rate of interest on the asset.

Advantages of using an online calculator to calculate Annuity Depreciation

Computation of depreciation is a complex and time-consuming process. The calculator can help you in many ways.

Online tool - This calculator is an online tool and can be used anytime, anywhere as it is accessible to you on your finger tips.

Easy to use - This tool has been created considering that not all of us are experts in accounting but we often need to do calculations for our business or personal purposes so the ease of use is the prime focus.

Time saving - Since it is easy to use and access, it takes only a fraction of time that you might spend otherwise on manual calculations.

It's easy for you to compare your depreciation expenses on different assets that you use within your business. Also the results can be used to compare your costs with the businesses that are your competition.

End use - The depreciation expense with this calculator will help you decide on the end use of your valuable assets. For example, if it is a building that you have been leasing for many years, it can help you decide if it will be profitable to renew the lease or buy out the property.

Benefits of using the Annuity depreciation method

This method is generally quite useful for calculating depreciation expense of high cost assets that have long life spans. It is generally used for assets like properties and buildings that are on lease, cars and other commercial vehicles, etc.

The other advantage of using this method is that it considers 'interest on capital', which many other methods of calculating depreciation fail to take into account. This method is considered the most exact and precise due to such factors.

Disadvantages

Depreciation calculation becomes a bit complicated for the assets where frequent additions, dismantling occur. It is not suitable for assets like machinery or industrial equipment.

It can be troublesome to profit and loss accounting over time because of diminishing rate of depreciation each year.

Also, even though it gives precise and exact results by using interest on capital but the rate is random and not in accordance with law.

In Summary

At the end, we can say that annuity depreciation method is a very powerful tool when used properly. It can help you make wise decisions for the future and gives better financial understanding about your assets in use.