Jerry is a successful small manufacturing company owner. He recently bought new machines to replace the old ones in order to give his company a fresh outlook and better production of goods. However, Jerry is not very familiar as to how wear and tear or depreciation has an impact on his machines. As such Jerry approached you for an understanding of how depreciation functions.

As an accounting student, you are required to:

1. Provide the meaning of depreciation.

(2 marks)

2. Provide a description of Straight Line method of depreciation (include suitable calculations to support your answer).

(9 marks)

3. Provide a description of Reducing Balance Method of depreciation (include suitable calculations to support your answer).