How do you compute annual depreciation using years?

To compute annual depreciation using years, it involves calculating what portion of the total asset cost will be expensed each year over the asset's useful life. The correct approach is to take the depreciable base, which is the asset's cost minus its estimated residual value, and divide that by the asset's useful life in years. This method provides a consistent annual expense, aligning with the matching principle in accounting, which requires expenses to be recognized in the same period as the revenues they help generate.

This process ensures that the cost of the asset is spread out evenly over its useful life, making it manageable for businesses to account for wear and tear, while also reflecting the asset's diminishing value over time. By using the depreciable base divided by the estimated years, businesses can accurately represent their asset management strategy in financial statements, ensuring that stakeholders have a clear understanding of the assets' worth as they age.