Straight-Line Method of Depreciation
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Lesson overview
Charging an equal amount of depreciation every year.
Go to lesson quiz →Exam guidance · WAEC WASSCE Paper 1 + Paper 2 Lens
Core idea (Double-Entry, Accruals & IFRS Financial Statements): Every transaction preserves Assets = Liabilities + Equity; recognise revenue when performance obligations are satisfied, not merely when cash moves.
Pacing
Objective speed on Paper 1 + structured step-by-step method marks on Paper 2 Theory/Practical.
How WAEC marks this
Examiners award method marks (M1) for stating the formula/definition and accuracy marks (A1) ONLY when SI units are written.
Watch out for
Writing bare numbers without working or omitting SI units loses up to 50% of Paper 2 marks even when the final value is right.
Lesson content
Overview — Straight-Line Method of Depreciation
Charging an equal amount of depreciation every year. This lesson is at the advanced level — by the end, you'll be able to recognise this question type, apply a reliable method, and avoid the traps that cost marks.
Key Concept
Depreciation is the systematic allocation of a fixed asset's cost over its useful life, reflecting wear and tear or obsolescence. The STRAIGHT-LINE method charges an EQUAL amount of depreciation every year: (Cost − Residual/Scrap Value) ÷ Useful Life in years.
Why It's Tested This Way
WAEC/JAMB test straight-line depreciation calculation directly because it's the simpler and more commonly examined of the two main depreciation methods, and its formula must be correctly applied with all three inputs (cost, residual value, useful life).
Method
To calculate straight-line depreciation, subtract the estimated residual (scrap) value from the asset's cost, then divide by the number of years of useful life — this same amount is charged as an expense every year.
Worked Example
Worked example: A machine costing ₦600,000, with an estimated residual value of ₦50,000 and a useful life of 5 years, has annual depreciation = (600,000 − 50,000) ÷ 5 = ₦110,000 per year.
Second Worked Example
Second worked example: If the same machine had a shorter useful life of just 2 years instead, annual depreciation = (600,000 − 50,000) ÷ 2 = ₦275,000 per year — a shorter useful life means a HIGHER annual depreciation charge, spreading the same total cost over fewer years.
Common Traps
Common trap: forgetting to subtract the residual/scrap value before dividing by useful life — depreciation only covers the portion of cost the business expects to actually LOSE, not the full purchase cost.
Lesson Summary
Remember: (1) identify what is being asked, (2) apply the WAEC strategy, (3) check against the traps. Complete the 10-question quiz below to unlock the next lesson — you need at least 60% to pass.
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