How to Calculate Partial Year Depreciation

Normally depreciation of an asset is expensed on a yearly basis. This is so a company can get an accurate picture of what it actually cost to use that asset over the course of a fiscal year. However, a company usually doesn't wait for the year to end to get rid of an asset either by sale or breaking down. When this occurs, the accounting department must use a partial year's depreciation in order to determine the actual depreciation expense.

Determine what the asset's depreciation would have been if the asset was owned for the entire fiscal year. Use the existing depreciation schedule for the asset to determine this. Use the same methodology you have been using for depreciation calculation all along.

Divide the total projected depreciation for the entire year by 12 to get the amount of monthly depreciation on the asset.

Multiply the amount of the monthly depreciation by the amount of months of the fiscal year the asset was owned. This will give you the total amount of depreciation for the partial year.

Tips

  • Each asset is going to be depreciated differently so be sure you know which method the asset is being depreciated by before you start this calculation.

Warnings

  • Don't just depreciate the value of the vehicle to zero after you have sold it. You will need to show both the selling price and the carrying value of the asset on the financial statement. Depending on the price you sold it for, there could be tax consequences.