MS Excel: SLN function for annual depreciation expense

Fakhriddinbek
6 days ago
2 min read

In business and accounting, tracking how assets lose value over time is essential for accurate financial reporting, tax planning, and capital budgeting. One of the simplest and most widely used methods of calculating depreciation is the Straight-Line Method.

Excel provides the SLN function to automate this calculation, making it easy to determine the annual depreciation expense for assets over their useful life.

Excel window showing a function arguments box for SLN formula, with fields for Cost, Salvage, and Life. Background cells visible.

The SLN (Straight-Line Depreciation) function calculates the constant annual depreciation of an asset from purchase to the end of its useful life, assuming the same amount is depreciated each year.

This method spreads the cost of the asset evenly across its useful life.

Syntax

=SLN(cost, salvage, life)

Parameter Breakdown:

Argument	Description
cost	The initial purchase price or cost of the asset
salvage	The residual value of the asset at the end of its useful life
life	The total useful life of the asset (in periods, usually years)

The result is the depreciation expense per period (usually per year).

Example 1: Basic Depreciation

Scenario: A company purchases equipment for $50,000 with an estimated salvage value of $5,000 and a useful life of 10 years. What is the annual depreciation?

=SLN(50000, 5000, 10)

Result: $4,500 per year

Each year, the equipment will lose $4,500 in value on the books.

Example 2: Monthly Depreciation

You can also use SLN for monthly depreciation by adjusting the life value:

Scenario: Same equipment ($50,000, $5,000 salvage), but depreciated monthly over 10 years.

=SLN(50000, 5000, 120) ← 10 years × 12 months

Result: $375 per month

Use Cases for SLN

Use Case	Why It’s Useful
Financial statements	Depreciation affects net income and asset values
Tax planning	Estimate deductions over time
Capital budgeting	Evaluate asset expenses over time
Budget forecasting	Smooth out cost allocations across periods
Fixed asset schedules	Maintain clear visibility on asset values

Related Functions

Function	Description
SYD	Sum-of-Years’ Digits (accelerated depreciation)
DDB	Double Declining Balance (faster early depreciation)
DB	Fixed Declining Balance method
VDB	Variable Declining Balance
SLN	Straight-line depreciation (this function)

SLN is best used when depreciation is evenly spread, while others are for accelerated depreciation models.

Tips and Common Mistakes

Mistake	Solution
Using life in months accidentally	Ensure life is in the same unit as your reporting period
Forgetting salvage value	Always estimate the expected end-of-life value
Applying SLN to intangible assets	SLN is typically used for tangible fixed assets (e.g., machinery, buildings)
Mixing depreciation methods	Be consistent for similar asset types unless justified

Best Practice: Use SLN for assets like office equipment, furniture, and buildings that depreciate evenly.

Summary Table

Feature	Value
Function Name	SLN
Full Form	Straight-Line Depreciation
Purpose	Calculate even depreciation expense
Best For	Simple depreciation of tangible assets
Inputs Required	Cost, salvage value, useful life
Output	Depreciation expense per period