To calculate depreciation, you need the purchase price, estimated useful life, and residual value of an asset. There are three main depreciation methods: straight-line depreciation calculates equal annual amounts over the asset's life, reducing-balance depreciation uses a fixed percentage of the asset's net book value each year, and revaluation compares estimated beginning and ending values of assets. Choosing a method depends on the type of asset, and accounting entries involve crediting depreciation expense and debiting the accumulated depreciation account.

1. How depreciation is
calculated

2. Information needed
 The purchase price of the asset
 The estimated useful economic life of the
asset
 The estimated residual value
 There are three main methods:

3. The straight-line method
 The annual depreciation charge= Cost of the asset-Net residual value
 Estimated useful life of the asset
 Pg. 73
 Very straight forward to calculate

4. The reducing-balance method of
depreciation
 Calculates the annual depreciation as a
fixed percentage of the net book value of
the asset
 More complicated, but more realistic.

5. The revaluation method of
depreciation.
 This is based on comparing the estimated value
of a group of non-current assets at the end of
the year with the estimated value of the same
group of non-current assets at the start of the
year.
 The difference in this value is depreciation
 Pg. 74

6. Choosing the right method of
depreciation
 Motor vehicles
 Machinery
 Loose tools

7. Accounting entries for
depreciation
 The provision for depreciation account