Scoring Strategy for Depreciation and Computational Accounting Exams

Sarah Mitchell

Australia

Accounting

Sarah Mitchell, an Accounting Exam Helper with 10 years of experience, specializes in preparing students for financial accounting, managerial accounting, auditing, and taxation exams. With her clear explanations and practical problem-solving techniques, Sarah helps learners understand core principles, reduce exam anxiety, and improve accuracy under pressure.

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First, Understand What Depreciation Really Means (Not Just the Definition)

Most students memorize:

“Depreciation is the decrease in the value of an asset.”

But in exams, concept clarity beats memorization.

You must deeply understand that:

• Depreciation is a systematic allocation of cost, not a random reduction.
• It is a non-cash expense — money is not going out every year.
• It applies only to depreciable assets, not land or current assets.
• It starts when the asset is ready for use, not necessarily when it is used.

Exam Tip:

If you clearly understand why depreciation is charged, you will:

• Automatically handle objective questions
• Write better theory answers
• Avoid logic-based calculation mistakes

Master the Three Core Pillars of Every Depreciation Question

Every depreciation problem in your exam — regardless of method — depends on only three basic factors:

1. Cost of Asset
• Purchase price
• Installation, freight, taxes, insurance
• Capital additions
2. Useful Life
• Given in years, hours, production units, or mineral quantity
3. Residual / Scrap Value
• Expected value at the end of asset life

These three elements define:

Depreciable Amount = Cost – Scrap Value

Golden Rule for Exams:

Before solving any question, always underline:

• Cost
• Useful life
• Scrap value

If you miss even one, your final answer will be wrong.

Journal Entries: The Foundation Students Usually Ignore

Most students jump directly into calculations and ignore journal entries, which is a big mistake. Exams frequently test:

Entry for Depreciation:

Depreciation A/c Dr.

To Asset A/c

Transfer to Profit & Loss:

Profit & Loss A/c Dr.

To Depreciation A/c

Purchase of Asset:

Asset A/c Dr.

To Bank A/c

Sale of Asset (Key Exam Area):

• Bank A/c Dr.
• Asset A/c Cr.
• Profit or Loss transferred to P&L

Why This Matters for Exams:

• Even if your calculations go wrong, proper journal entries can save marks
• Practical papers often allocate working + journal + narration marks

Straight Line Method (SLM): Your First Scoring Weapon

This is the simplest and most scoring method in all Accounting exams.

Formula:

Depreciation = (Cost – Scrap) / Useful Life

What Examiners Expect:

• Correct annual depreciation
• Proper Machinery Account format
• Accurate Depreciation Account
• Correct closing balance each year

Common Student Mistakes:

• Forgetting scrap value
• Dividing by wrong number of years
• Incorrect final sale adjustment

Exam Hall Strategy for SLM:

1. Calculate annual depreciation clearly on top
2. Use step-by-step posting
3. Always check:
4. Opening Balance – Depreciation = Closing Balance
5. Diminishing Balance Method: Where Most Students Panic

This method creates fear because:

• Depreciation keeps changing every year
• The percentage is applied on Written Down Value (WDV)

Core Rule:

Depreciation = Opening Book Value × Rate

Some papers even test calculation of rate using the formula, which students often skip during preparation.

Exam Hall Survival Rule:

• Never calculate directly from cost after Year 1

Always check:

• Depreciation decreases every year

If your depreciation is increasing under this method — something is definitely wrong.

Sum of Years of Digits (SYD): Logical, Not Difficult

This method scares students because of the formula, but it is actually very logical.

Key Concept:

You write off higher depreciation in earlier years and lower depreciation later using a fraction based on life.

Example:

If life is 5 years:

5 + 4 + 3 + 2 + 1 = 15

Year 1: 5/15

Year 2: 4/15

Year 3: 3/15... and so on.

Exam Trick:

Once you prepare one full illustration properly, all questions become identical in pattern.

Machine Hour Method: Where Time Becomes Money

Here, depreciation depends on machine usage, not years.

Formula:

Depreciation per hour = (Cost – Scrap) / Estimated Working Hours

Then:

Depreciation for the year = Rate × Actual Hours Used

Common errors:

• Students forget idle time adjustment
• Students apply yearly instead of hourly logic

Exam Hall Rule:

Always calculate:

1. Total effective hours first
2. Then hourly rate
3. Then yearly charge

Production Units Method: Output-Based Logic

This method is similar to Machine Hour but applied to units produced instead of hours.

Depreciation = Depreciable Amount × (Actual Production / Total Estimated Production)

This method tests:

• Logical thinking
• Proportion calculation
• Attention to production pattern

Smart Tip:

If the question gives:

• Uneven production over years → This method is almost confirmed.

Depletion Method: Special but Scoring

This method applies to:

• Mines
• Quarries
• Natural resources

Here, quantity extracted decides depreciation, not time.

Students usually ignore this chapter thinking it is minor. But:

• It is highly scoring
• Questions are direct
• Examiners love testing it conceptually

Revaluation of Assets & Depreciation After Revaluation

This is a high-level exam favorite.

Key rules students must remember:

• Increase in value → Revaluation Reserve
• Decrease in value → Profit & Loss
• After revaluation → Depreciation is charged on the revalued amount

Sale of previously revalued assets is often used to:

• Test concept clarity
• Check reserve adjustment logic
• Trap students with partial loss adjustments

Exam Hall Safety Rule:

Loss → Adjust from Revaluation Reserve first → Remaining to P&L.

How to Handle Depreciation Questions in the Exam Hall (Step-by-Step Strategy)

Step 1: Read the Question Slowly

Do NOT assume the method.

Underline:

• Date of purchase
• Method
• Rate
• Scrap value
• Sale date
• New additions

Step 2: Identify the Pattern

Is it:

• Straight line?
• Reducing balance?
• Revaluation?
• Sale mid-year?
• Addition during year?

Once you identify the type, half the problem is solved.

Step 3: Prepare Working Notes First

Never jump directly into the account.

Write:

• Annual depreciation
• Time proportion
• Adjustment for additions/sales

This earns:

• Partial marks
• Error tracing advantage

Step 4: Draw Proper Account Format

Always use:

• Dr. on the left
• Cr. on the right
• Date – Particulars – Amount

Messy accounts = lost marks even with correct numbers.

Step 5: Check Logical Flow

Ask yourself:

• Is depreciation reducing asset value?
• Is sale recorded properly?
• Is profit/loss transferred?

Most Common Student Mistakes (You Must Avoid)

How to Practice for Guaranteed Success

Stage 1: Concept Lock (3–4 Days)

Study:

• Meaning
• Objectives
• Factors
• Methods

No numericals yet.

Stage 2: Method-wise Practice (7–10 Days)

Practice:

• 4–5 questions of each method
• With full account format
• With working notes

Stage 3: Mixed Examination Questions (Final 5 Days)

Practice:

• Sale
• Addition
• Revaluation
• Partial year usage
• Combined methods

How This Strategy Applies to ALL Computational Accounting Exams

Once you master Depreciation properly, you automatically become strong in:

• Asset Accounts
• Provision for Doubtful Debts
• Consignment Loss Calculations
• Inventory Valuation
• Branch Accounts
• Partnership Adjustments

Why?

Because all of them depend on:

• Logical flow
• Stepwise calculations
• Clear account presentation
• Working note discipline

Final Exam-Day Power Strategy

The night before the exam:

• Revise all formulas
• Revise journal entries
• Revise 2 solved full-length questions
• Sleep properly

Inside the exam hall:

• Start with the question you trust the most
• Write workings clearly
• Keep accounts neat
• Do not panic if first answer takes time

Final Words for Students

Depreciation is not just a chapter — it is your gateway to mastering Accounting logic. If you prepare it:

• With concept clarity
• With method-wise control
• With exam-hall discipline

You will not just score well in this chapter —

You will transform your performance in the entire Accounting paper.