Depreciation is the allocation of the cost of a capital expenditure to the periods of its use. The method used to allocate these costs is the straight-line depreciation method. Under this method, the cost of the asset, less any estimated salvage value, is divided by the number of years of its expected life to arrive at the annual depreciation.

The calculation to determine annual depreciation expense is as follows:

Contact the Manager of Current Unrestricted Funds of the Comptroller's Office for guidelines on estimating a capital expenditures' expected life.

Once the recharge operation calculates the annual depreciation expense for a capital expenditure, it includes the expense in the expenditure budget of the recharge operation and the rate calculation. Subsequently, an annual journal entry is prepared to record the charge to the recharge operation Ledger 2 account and credit to the Ledger 0-8XXXX account.