Annuity Charging Method Calculator

Enter value and click on calculate. Result will be displayed.

Depreciation = [C(1+Rate)Years-Scrap][1-(1+Rate)] / [1-(1+Rate)Years]

Cost of Machine:
Scrap Value:
Years:
Rate of interest:
%
Yearly Depreciation:

A Depreciation – Annuity Charging Method Calculator helps calculate depreciation by considering both the cost of the asset and the interest on the capital invested, using the annuity method. It spreads the total cost of an asset (including the interest) evenly over its useful life, resulting in equal annual charges.

Here's how it works:

Asset Cost: The original price of the asset.
Interest Rate: The rate of return expected on the capital.
Useful Life (Years): How long the asset is expected to last.
The formula used is based on an Annuity Factor, calculated as:


Where:

r = Interest rate per period
n = Number of periods (years)
Then, the annual depreciation charge is:

Annual Charge = Asset Cost × Annuity Factor
The charge stays the same each year, but it's split between:

Depreciation (reducing asset value)
Interest (on the remaining balance)
Over time, the interest portion decreases, and the depreciation portion increases.