Depreciation is an artificial charge made against your balance sheet for income tax purposes. The intent is to allow the business to hold cash that can be used to purchase new equipment when the old equipment wears out. If you are not quite sure how to estimate this charge, add up your equipment, freight for equipment, installation expenses, and all of your start-up expenses. Divide the total by seven. If you have used our investment calculator to calculate your loan value, the estimated total for amortization and depreciation was also calculated.

Note: This method is adequate for doing an income estimate. It is not adequate for preparing income taxes. Either learn the tax code about depreciation or hire a CPA.