Depreciation is decline in asset value over time. Methods: (1) Straight-line: D = (Cost - Scrap)/Years, annual depreciation constant. Residual value = Cost - (D × years); (2) Declining balance: D = Cost × rate, decreases annually. Value = Cost(1 - r)^n; (3) Sum-of-years-digits: Accelerated method. Example: Cost=10000, life=5 years, scrap=1000. Straight-line: Annual depreciation = 1800. Year 1 residual = 8200. Declining balance at 20%: Year 1 value = 8000, Year 2 = 6400. Exam tip: Identify depreciation method from problem. Straight-line most common in exams. Always state residual value clearly.