How to use the MS Excel SLN Function to determine Depreciation
- Daniel Rivera, PMP
- Jun 30, 2021
- 3 min read
Updated: Sep 19
Depreciation is one of the most important financial concepts for project managers, business analysts, accountants, and anyone working in IT or corporate finance. When managing projects, you’ll often need to factor in the declining value of equipment, software, or other capital assets. Fortunately, Microsoft Excel provides built-in functions like SLN (Straight-Line Depreciation) to make these calculations simple, consistent, and accurate.
In this article, we’ll walk through how the SLN function works in Excel, explain when and why to use it, and provide a real-world laptop purchase scenario to demonstrate depreciation in action. By the end, you’ll be able to confidently use Excel’s SLN function to calculate depreciation for your IT projects, financial planning, or asset management needs.
The video below also goes into detail about the SLN function...
What is Depreciation and Why Does It Matter?
Depreciation represents the gradual reduction in value of a tangible asset over its useful life. For example, when you buy a laptop for $2,000, its value decreases each year due to usage, wear-and-tear, and technological obsolescence.
For project managers and financial leaders, understanding depreciation matters because:
It impacts project budgets and cost management
It influences financial reporting and tax calculations
It provides visibility into true asset value over time
It helps with investment decision-making (should you buy new equipment now or later?)
By incorporating depreciation into your financial models, you can ensure more accurate project cost forecasts and avoid underestimating long-term expenses.
Understanding the Straight-Line Method of Depreciation
The straight-line method is the simplest and most widely used approach to calculating depreciation. Under this method:
The asset loses the same amount of value each year
Depreciation expense is evenly spread across its useful life
It’s straightforward to calculate and explain to stakeholders
For example, if you purchase a laptop for $2,000 with a salvage value of $200 and a useful life of 5 years:
Annual Depreciation=Cost – Salvage ValueUseful Life=2000–2005=360\text{Annual Depreciation} = \frac{\text{Cost – Salvage Value}}{\text{Useful Life}} = \frac{2000 – 200}{5} = 360Annual Depreciation=Useful LifeCost – Salvage Value=52000–200=360
This means each year, the laptop depreciates by $360, until it reaches its salvage value.
The Excel SLN Function Explained
Excel makes this even easier with the SLN function. The syntax is:
=SLN(cost, salvage, life)
Where:
cost = the initial purchase price of the asset
salvage = the value of the asset at the end of its useful life
life = the number of periods (years) the asset will be in use
Excel automatically applies the straight-line formula for you, saving time and avoiding manual calculation errors.
Real-World SLN Function Example: Laptop Purchase
Imagine you purchase 10 laptops for your IT project team, each costing $2,000. The salvage value after 5 years is estimated at $200 per laptop.
Here’s how you’d set this up in Excel:
Asset | Cost | Salvage | Life (Years) | Depreciation per Year |
Laptop 1 | 2000 | 200 | 5 | =SLN(B2,C2,D2) |
When you enter the SLN function, Excel will return 360, meaning each laptop depreciates by $360 per year.
If you scale this across 10 laptops, you can calculate the total depreciation for your project’s IT assets.
Why Project Managers Should Care About Depreciation
While depreciation is traditionally an accounting concept, project managers should understand and track it because:
IT projects often involve expensive hardware/software investments
Stakeholders expect accurate cost forecasts
Depreciation impacts project ROI (Return on Investment)
Long-term asset planning is essential for sustainability
By mastering Excel’s SLN function, you’ll have an edge in building financial models that are realistic and credible.
Advanced Tips for Using SLN in Excel
Apply Across Multiple Assets – You can drag the formula across rows for multiple assets like servers, laptops, or machinery.
Use Absolute References – Fix the expected life and salvage values with $ references if they are consistent across assets.
Combine with NPV/IRR Functions – Integrate depreciation into Net Present Value (NPV) or Internal Rate of Return (IRR) calculations to make investment decisions.
Visualize Depreciation Trends – Create line charts showing how asset value decreases year over year.
Common Mistakes to Avoid
Forgetting Salvage Value – Always include a salvage estimate; otherwise, you’ll overstate depreciation.
Wrong Useful Life – Be realistic; laptops may only last 3–5 years, not 10.
Mixing Methods – SLN is for straight-line depreciation; don’t confuse it with accelerated methods like DDB (Double Declining Balance).
Final Thoughts
The Excel SLN function is an indispensable tool for project managers, financial planners, and business leaders. It simplifies depreciation, improves accuracy in cost tracking, and strengthens financial decision-making.
By applying the SLN function to real-world scenarios like IT equipment purchases, you’ll gain a practical skill that enhances both project management and financial planning.
Comments