The Straight Line Breakdown

Straight line depreciation is one of the most common methods used when depreciating assets.  Have you ever wondered about the list of conventions, and what they mean, and what they do?  I hope these explanations help you understand which depreciation convention is right for your assets!

Full Month

• Depreciation begins with the first month in service
• Equal depreciation amount every month, determined by the total number of months in service
• Continues throughout useful life

Mid Month:  

• If the date in service is before the 16^th, a full month's worth of depreciation calculates the asset's first month
• $0 is charged in the first month if Date in Service is after the 15^th
• An ‘extra' month is added to the asset's useful life to compensate for the amount not charged in the first month of life.

Zero Month:  

• No depreciation is calculated in the asset's first month in service
• Beginning with the second month, depreciates like Full Month convention

Full Year:

• An entire year's worth of depreciations calculates in the first year, regardless of the month in service date.  
• During the first year, the annual depreciation will be distributed over the number of periods in service for the first year.  Example: If the asset is placed in service in the third period, then the first year's depreciation will be evenly distributed between periods three through twelve.
• After the first year, the asset will depreciate in the same manner as Full Month.

Half Year:  

• One half of a normal year's depreciation will be depreciated in the first year.  
• The actual amount of depreciation will be distributed over the number of periods the asset is in service during the first year.  
• Beginning with the second year, a full years' depreciation is taken
• Continues until the last year, when an additional half year's depreciation is taken.  This is like the Half Month convention we discussed earlier. The additional year is added to compensate for the half year skipped in the beginning of the asset's life.

Zero Year:  

• Just like Zero Month, no depreciation is calculated in the first year of service
• In the first period of the asset's second year, depreciation will begin calculating in the same manner as Full Month.