AMORLINC function
The AMORLINC function in Excel calculates the depreciation of an asset for a specified period using the linear depreciation method, which distributes the depreciation amount evenly over the asset’s useful life. This is typically used for accounting purposes, where the depreciation expense is consistent each period.
Syntax
AMORLINC(cost, date_purchased, first_period, salvage, period, [no_of_periods])
Parameters
cost: The initial cost of the asset, i.e., the purchase price or cost of the asset when it was acquired.date_purchased: The purchase date of the asset (in Excel date format).first_period: The first period in which depreciation is calculated. This is the number of periods from the asset’s purchase date to the first depreciation period.salvage: The asset’s salvage value, which is the estimated residual value of the asset at the end of its useful life.period: The period for which depreciation is to be calculated (e.g., 1 for the first period, 2 for the second, etc.).[no_of_periods](optional): The total number of periods over which depreciation is to be calculated. If omitted, the function assumes the total number of periods is the same as the asset’s useful life.
How It Works
The AMORLINC function calculates depreciation using the linear method, meaning the asset depreciates by the same amount in each period. The function uses the following formula to calculate the depreciation for a given period:
Where:
- Cost is the initial cost of the asset.
- Salvage Value is the estimated residual value of the asset.
- Number of Periods is the total number of periods (usually years or months) over the asset’s useful life.
Example
Suppose you purchased an asset for $10,000 on January 1, 2023. The asset has a salvage value of $1,000 and a useful life of 5 years. You want to calculate the depreciation for the 1st period (first year) using the linear depreciation method.
The formula would be:
=AMORLINC(10000, "1/1/2023", 1, 1000, 1, 5)
Explanation of the Example:
10000: The initial cost of the asset."1/1/2023": The date the asset was purchased.1: The first period of depreciation calculation.1000: The salvage value of the asset.1: The first period (calculate depreciation for year 1).5: The total number of periods (in years) over which the asset will be depreciated.
Important Notes
- The AMORLINC function calculates depreciation evenly across all periods (linear method), which is the same amount for each period.
- The first_period argument specifies the first period of depreciation, which allows for cases where depreciation might not start immediately after the purchase date.
- The no_of_periods argument (optional) defines how long the asset will be depreciated, typically corresponding to its useful life.
Summary
The AMORLINC function in Excel is used for calculating depreciation using the linear method, where the depreciation expense is spread evenly across the asset’s useful life. This method is commonly used when the asset loses value uniformly over time. It’s a simple and widely used depreciation method in accounting.